DEVGEN : nv (Euronext Brussels, DEVG) - Business update May 18, 2011

Regulated information

Devgen nv (Euronext Brussels, DEVG) - Business update May 18, 2011

Zwijnaarde, Belgium, 18 May 2011 - Devgen (DEVG; Euronext Brussels) reports significant progress in each of the key value drivers of its business plan and a strengthened cash position of Eur 52.9 million^[1]:
#_ftn1.

Devgen hybrid rice seed pipeline:

Next Generation Hybrid Rice (NGHR) seeds on track for 2011 expanded testing in India and the Philippines

One of Devgen's key R&D innovations includes the breeding of a new generation of hybrid rice for India and Southeast Asia with improved yields, taste, grain quality and cost of goods (COGS). Devgen started this R&D program in 2005 and expects NGHR-seeds for market launches from 2013 onwards. Six years into this program, the company announced positive yield and COGS results on the first products delivered through this technology. The company is confident in the potential of Devgen's approach to deliver the Next Generation of Hybrid Rice (NGHR) to Indian and Southeast Asian rice growers.

Over the next two years the company will continue to test each growing season hundreds of candidate hybrids in different market segments. Hybrids of superior yield and quality are then advanced to testing in increasingly larger numbers of locations, in preparation for market launch.

This process is on track: In Q1 2011, the small scale seed production of Devgen's research hybrids and candidate product hybrids has been completed satisfactorily in India and the Philippines. These materials will undergo multi-location testing in the upcoming July planting in India and in the June planting in the Philippines. Devgen expects harvests in September 2011 and processed test results in December.

Progress on product candidates

Devgen is continuously expanding and improving its existing portfolio of hybrid rice seeds:

-     In Q1 2011, one of Devgen's promising hybrids was selected for the second consecutive year as one of the top 5 yielding hybrids in the "early-medium maturity" segment of the ICAR^[2]:
#_ftn2  government trials in India and is advanced for its third year of testing. In these trials the India government evaluates hybrids submitted by companies and research institutions. Hybrids selected in 3 consecutive years may receive the government label of 'notified' hybrid, a quality label recognized by the growers. Notified hybrids also are eligible for subsidy in government subsidy programs, an increasing trend in India.
-     Another promising pipeline hybrid was nominated in its first year of government ICAR trials and promoted to the second year of trial.
-       Devgen starts selling three new hybrids in 2011 in India: Ganga, a 'notified hybrid' out of Devgen's portfolio, and two other products resulting from Devgen's R&D.

Biotech traits in rice

In Q1 2011, activities in Devgen's government certified biotech greenhouse -facility in Hyderabad (India) were further expanded. Devgen scientists continued to introgress and evaluate different traits in elite germplasm and started production of biotech hybrid seeds for field trials (targeted as of 2012, subject to regulatory approval). In India, Devgen focuses on insect resistance and herbicide tolerance.

In Singapore, a new certified biotech greenhouse was commissioned in Q1 2011. The focus is on candidate trait and event selection for abiotic stress traits.

Market access in India and Southeast Asia

An annually recurring key milestone in Q1-early Q2 is whether Devgen's seed production in India is on target in terms of quantity, quality and COGS. With all sorghum and pearl millet, 90% of the sunflower and approximately 80 % of the rice seed production fields harvested, we are pleased to report that the company is on target in both volumes and COGS. Hence, the quantities produced should allow Devgen to realise significant growth in 2011. This assumes normal weather and market conditions in the course of the sales season.

The main sales season (the Kharif season or summer season) in India for three of Devgen's crops, rice, sorghum and pearl millet, starts in May and ends in July.

The general outlook for hybrid rice acceptance in India is positive:
-      Devgen's four premium products that are in the market today are well accepted by growers as they have high yield combined with good grain quality.
-       In order to promote the use of hybrid rice seeds, the states of Bihar and Uttar Pradesh in India have expanded in 2011 their hybrid rice subsidy programs. This is expected to grow the overall hybrid rice seed market but may put downward pressure on prices of hybrid rice seeds. In this subsidised segment Devgen is launching its notified hybrid Ganga

The outlook for sorghum, pearl millet and sunflower is as expected.

The Philippines

RH1531, one of Devgen's products grown in India, has performed well in registration trials in the Philippines in the last 3 seasons. Subject to positive trial results in the latest dry season, this hybrid may be granted registration for the country in 2011.
Today Devgen's sales in the Philippines are limited by seed production capabilities. The company continues to develop an experienced staff and grower base and subsequently infrastructure and is also working towards supplementing its volume with hybrid seeds produced in India.
The expected registration in Philippines of RH1531, will give the company more flexibility to supplement the Philippines with imported seeds from India. In the coming years Devgen intends to also supplement its seed production of its Philippine product Masuwerte^® with seed of this hybrid produced in India.

Devgen and SHS, together with the National Outstanding Farmers Association, celebrated the positive customer feedback of their hybrid rice DG 1 SHS in Indonesia

In November 2010, Devgen and PT. Sang Hyang Seri (Persero) (SHS) launched the rice hybrid DG 1 SHS in key rice growing areas in Aceh, Sumatra, Java and Sulawesi. An expert team of Devgen product specialists and the SHS marketing team, who provide training and education to the local farmers, supported this launch.

The success of the first season was celebrated in a harvest ceremony in Bantul regency, Java, on April 6^th, 2011. In 2011, Devgen and SHS target to further increase the supply of Devgen's premium hybrid rice seed to the Indonesian grower. A team of Devgen Indonesian agronomists was trained in the Philippines to start pilot seed production in Indonesia in Q2 of registered products as well as products in registration.

Nematicides

Devgen developed a novel nematicide, an agro-chemical product that protects crops from damage by parasitic nematodes. Devgen has proven the efficacy and superior environmental profile of the product in a wide range of edible crops and situations. This product has been sold since 2009 in Turkey under the brandname Devguard^® and since 2010 in the US under the brandname Enclosure^®.

Europe - appointment of distributor and progressing regulatory dossiers
In March, Devgen nv and Cheminova A/S signed an agreement for the distribution of Devgen's nematicide Devguard^® in Spain, Italy, Greece and Portugal, for use on vegetable crops cultivated in greenhouses. This is an important market representing a significant proportion of high value vegetable crops grown in these countries for both local consumption and export. Few options remain for the growers to manage plant parasitic nematodes in these crops.

Devgen and Cheminova are actively working together with growers and stakeholders in Italy, Spain, Portugal and Greece in preparation for market launch of Devguard^® as soon as necessary approvals are obtained. Last year, upon Devgen's request, the EU commission added the nematicidal use of the active ingredient to the Directive 91/414/EC. This was an important milestone to progress the review of the regulatory dossiers for Devguard^® which Devgen has submitted in Spain, Italy and Greece. Initial approvals may hence be expected as of 2011.

US - Devgen provides another tool with versatile application timings and options for use within an integrated nematode management plan.
In Q1, Devgen started its second sales season for Enclosure^® in the US with an extended label, allowing greater flexibility in application timing for managing nematodes. It also allows a more flexible use in combination with other nematode-controlling agents.

South-Africa - In anticipation of regulatory evaluation, Devgen continues to create awareness in South-Africa of its development in the field of nematicides. At the 20^th symposium of the Nematological Society of South Africa (NSSA) on 16-18^th May, Devgen presented an update on recent efficacy and safety data obtained and validation in the market.  

Financial update for the first quarter 2011

Cash position strengthened with ? 26.8 million

-     On March 30th, Devgen raised ? 26.8 million through a private placement. Cash including restricted cash amounted to ? 26.1 million at the end of the first quarter. Taking into account the proceeds of the private placement, cash at the beginning of the second quarter (April 4^th) amounted to ? 52.9 million, up from ? 28.8 million at the start of the year. Cash restricted in its use, included in the above numbers remains at ? 5.9 million of which ? 3.7 million is available through an overdraft facility in India for financing working capital requirements. The current cash position places Devgen in an excellent position to grow its seeds and crop technology business in line with its business plan. This includes accelerating the growth of its premium hybrid rice seed business in the Indian subcontinent and South-East Asia and investment in its "Next Generation Hybrid Rice" (NGHR) and biotech trait technology platforms to develop increasingly more producible, high yielding and abiotic stress tolerant hybrid rice seeds.

Key financials

-      Revenues for the first quarter amount to ? 3,791 ('000) compared to ? 3,032 ('000) over the same period last year. Revenue from research collaboration agreements was complemented with revenue from seed sales during the early season (mainly sorghum). The principal sales season starts in May-June in time for start of the planting season. The nematicide sales season similarly starts in spring.
-       EBITDA at the end of the first quarter comes at ? -711 ('000) compared to ? -591 ('000) at the end of the same period last year. Higher revenues and subsequently higher gross profit were offset by higher G&A expenses due to increased presence in new geographies, with sales and marketing expenses and R&D expenses at the same level as last year.
-       Net loss for the period amounts to ? -1,416 ('000) compared to ? - 1,168 ('000) at the end of Q1 2010. Net loss was negatively impacted by foreign exchange loss resulting from the fluctuation of the EUR/USD and SGD/INR conversion rates.
-     Devgen confirms the guidance given in March 2011 and continues to expect significant top line growth for its seed business.

About Devgen nv

Devgen's mission is to deliver the next green revolution in rice to growers that cultivate 60m ha rice in India and S.E. Asia.

Devgen uses advanced biotechnology and molecular breeding technology to develop the Next Generation Hybrid Rice (NGHR) and crop protection solutions with a superior environmental profile:

-       Devgen developed the next generation of hybrid rice, improving yield, seed productivity, grain quality, and tolerance to biotic and abiotic stress factors. Devgen strongly believes that this hybrid rice technology has the potential to drive the accelerated conversion of varietal rice to hybrid rice.

-     Anticipating the need to increase insect resistance and drought/heat tolerance in rice to a level that is beyond what can be achieved with classical breeding, Devgen created a portfolio of biotech traits using own technology as well as in-licensed technologies.

-      Devgen established an integrated seed business in India and Southeast Asia through which its rice crops and technologies reach the market.

-     In India, Devgen complemented its hybrid rice business with geographically and seasonally complementary crops: hybrid sorghum, pearl millet and sunflower.

-       In its Crop Protection unit, Devgen developed a novel nematicide, an agro-chemical product that protects crops from damage by parasitic nematodes. This product is sold in Turkey and in the US.

-     Devgen innovates in crop protection research and environment induced stress tolerance for its own crops and providing technology to corporate partners.

Incorporated in 1997, Devgen has offices in Ghent (Belgium), and has subsidiaries in Singapore, Hyderabad (India), Yogyakarta (Indonesia), General Santos (Philippines) and Delaware (US), totaling about 280 employees.

For more information please contact:

Or visit: www.devgen.com:
http://www.devgen.com/

This press release may contain forward-looking statements containing the words "anticipates", "expects" , "intends", "plans", "estimates", "may" and "continues" as well as similar expressions. Such forward looking statements may involve known and unknown risks, uncertainties and other factors which might cause the actual results, performance or achievements of Devgen to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: agricultural risks and difficulties, including weather factors, diseases and pests, the costs and requirements of regulatory compliance and the speed with which approvals are received; public acceptance of biotechnology products; political, economic and social developments in countries where Devgen operates and other risks and factors detailed in the company's most recent annual report.
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