FSI ANNOUNCES CAPEX EXPENDITURE TO ACQUIRE A VIAL FILLING LINE FOR INJECTABLE DRUGS SUCH AS GLP1 FOR WEIGHT LOSS
Flexible Solutions International (NYSE-AMERICAN: FSI) announced a significant capital expenditure to acquire a production line for vial filling of injectable drugs such as GLP1 for weight loss. The $2.5 million investment secures a nearly-unused production line capable of producing 22.5 million vials per year, reducing the typical wait time and cost for such equipment. The company aims to leverage its existing clean room skills from its food/nutrition division to enter the high-risk, high-reward drug compounding market. CEO Dan O’Brien emphasized the need for de-risking this venture by securing sales and potentially partnering with experienced players in the industry. The company plans to proceed only if the benefits to shareholders outweigh the risks, with a minimum one-year timeframe before production can commence, subject to regulatory approvals.
- FSI acquired a nearly-unused production line for $2.5M, saving $10M compared to market prices.
- The new line can produce up to 22.5 million vials per year.
- Existing skills in clean room environments from the food/nutrition division are transferable to drug operations.
- The injectable diabetes/weight loss drug market represents a significant revenue opportunity.
- Securing the production line reduces wait times by many months, expediting potential market entry.
- Entry into the drug compounding market is capital intensive and high risk.
- Substantial additional capital and management time will be required if the project proceeds.
- No revenue is expected for at least a year after the decision to proceed.
- The project may be delayed or not proceed if firm sales are not secured.
- Regulatory approval requirements could extend the timeline beyond the one-year minimum.
Insights
FSI's acquisition of a vial filling line for $2.5 million is significant, given the standard cost of $13-$15 million and an 18-month wait time. This move hints at potential cost-efficiency and strategic positioning. By acquiring the line preemptively, FSI capitalizes on both time and cost savings, which could translate into competitive advantage.
However, several markers of uncertainty persist. The fixed cost of $2.5 million represents only part of the capital requirement. FSI's management mentions that substantial additional capital will be needed, which could imply further equity dilution or debt burden if internal funds are insufficient. Furthermore, the company is clear about the potential risk, noting that the project will advance only if it can secure sufficient sales and partnerships to de-risk the venture.
The financial landscape for small cap companies entering capital-intensive industries involves high risks due to cash flow uncertainties, potential over-leverage and regulatory hurdles which can impact timelines significantly. Investors should closely monitor FSI's ability to secure pre-sales and partnerships to mitigate these risks before committing.
In sum, while the cost savings and market opportunity are promising, the need for careful risk management and additional capital casts a shadow over the immediate financial benefits.
The acquisition of a vial filling line aligns well with FSI’s aspiration to enter the injectable drug market, especially for diabetes and weight loss drugs like GLP1. The market for these drugs is expansive, driven by increasing prevalence of diabetes and obesity.
However, entering the pharmaceutical industry, particularly the sterile drug compounding sector, requires stringent regulatory compliance. FSI’s transition from GMP to 503B certification marks a significant hurdle, but their food grade certification and clean room experience position them favorably.
The market need for injectable drugs, especially in critical shortages, presents a lucrative opportunity. Yet, the high stakes of regulatory delays and capital expenditure highlight the importance of strategic partnerships. Aligning with established, experienced industry players could accelerate market entry and compliance, reduce risk and provide a faster revenue stream.
While FSI's potential is notable, their success heavily depends on seamless regulatory transitions and effective collaborations.
The injectable drug market, especially for diabetes and weight loss, represents a multi-billion dollar opportunity. Major players dominate this space, but there is room for smaller companies like FSI to capture significant market share due to current supply shortages. By securing a vial filling line at a fraction of the typical cost, FSI positions itself to potentially capitalize on this opportunity.
That being said, entry into this market is not guaranteed. The company indicates a cautious approach, emphasizing de-risking strategies such as pre-sales and potential joint ventures. This suggests a prudent market entry strategy, but it also highlights the uncertainties inherent in breaking into a highly competitive and regulated industry.
Investors should note that while FSI's current market positioning and cost-effective acquisition provide a promising outlook, the realizable benefits are contingent on successful navigation of sales acquisition, regulatory approvals and capital funding.
VICTORIA, BRITISH COLUMBIA, June 05, 2024 (GLOBE NEWSWIRE) -- FLEXIBLE SOLUTIONS INTERNATIONAL, INC. (NYSE-AMERICAN: FSI), is the developer and manufacturer of biodegradable polymers for oil extraction, detergent ingredients and water treatment as well as crop nutrient availability chemistry. Flexible Solutions also manufactures biodegradable and environmentally safe water and energy conservation technologies. FSI is increasing its presense in the food and nutrition supplement manufacturing markets.
Today the Company announces the acquisition of a production line capable of filling large numbers of vials with injectable drugs.
The CAPEX disclosed in this news release is material. Furthermore, the Company believes that it should disclose FSI’s potential advancement into drug compounding operations in order to prevent accidental partial disclosure during the course of our investigations and due diligence in the business of sterile drug compounding.
Mr. Dan O’Brien, CEO, comments, “The drug compounding industry is a logical progression for FSI. But, it is a capital intensive, high risk, high reward business. We hope to de-risk our possible entry by securing sales prior to further expenditure and by looking for partners.” Mr. O’Brien continues, “Only if we can de-risk sufficiently, will we proceed.”
FSI has progressed from good manufacturing practice to food grade certification and production over the last 3 years. The next, relatively small, step of certification is advancing to a 503B sterile drug compounding clean room. We have developed the skills to operate in clean room environments as part of our food/nutrition division and are comfortable that our skills are transferable to 503B drug operations.
FSI has identified a very large revenue and profit opportunity in injectable diabetes/weight loss drugs. These drugs and many others are in short supply. If possible, we would like to expand into this market. This does not mean that we will, only that we see it as the most profitable expansion of our business that might become accessible in the next several years. Diabetes/weight loss drugs represent a market place of many tens of billions, dominated by major drug companies, but still with transformational revenue streams available to small companies like FSI.
Clean room production of injectable drugs requires a fully automated production line. Currently, wait times for such lines are in the range of 18 months and the cost for a line capable of 150 vials per minute is
This production line can only realistically operate a maximum of 10 hours a day 250 days a year using two shifts. Even so, this represents 22.5 million vials per year.
Once again, we caution you that the purchase of this line, combined with our skill set and a market need for more injectable drugs, does not mean that this project will proceed. It’s an option; not a given. Management will continue its diligence program and only move forward if the reasonably expected reward to the shareholders is judged to be far higher than the risk.
Our time frame for this expansion, should it take place, is one to three years. No revenue is possible for one year after a decision is made to proceed. The minimum time of one year to production is not guaranteed because of regulatory approval requirements.
Risk must be controlled – substantial additional capital will be needed if we proceed and significant management time will be redirected from our other growth opportunities. If the cost in capital or management is too high, an expansion in this market will be delayed until conditions are favorable.
Sales: An expansion of this magnitude by FSI must be backed by sales in order to reduce risk. Efforts to obtain firm sales, subject to delivery, are underway. Obtaining firm purchase orders are not certain and lack of sales may delay expansion or cause us not to proceed. It may be prudent to find a joint venture partner with sales experience in the industry if, such a partner can be shown to reduce risk more than they reduce reward.
About Flexible Solutions International
Flexible Solutions International, Inc. (www.flexiblesolutions.com), based in Victoria, British Columbia, is an environmental technology company. The Company’s NanoChem Solutions Inc. subsidiary specializes in biodegradable, water-soluble products utilizing thermal polyaspartate (TPA) biopolymers. TPA beta-proteins are manufactured from the common biological amino acid, L-aspartic and have wide usage including scale inhibitors, detergent ingredients, water treatment and crop enhancement. Along with TPA, this division started producing other crop enhancement products as well. In 2022, the Company entered the food and nutrition markets by obtaining FDA food grade approval for the Peru IL plant. The other divisions manufacture energy and water conservation products for drinking water, agriculture, industrial markets and swimming pools throughout the world.
Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor" for forward-looking statements. Certain of the statements contained herein, which are not historical facts, are forward looking statement with respect to events, the occurrence of which involve risks and uncertainties. These forward-looking statements may be impacted, either positively or negatively, by various factors. Information concerning potential factors that could affect the company is detailed from time to time in the company's reports filed with the Securities and Exchange Commission.
Flexible Solutions International
6001 54th Ave, Taber, Alberta, CANADA T1G 1X4
Company Contacts
Jason Bloom
Toll Free: 800.661.3560
Fax: 403.223.2905
Email: info@flexiblesolutions.com
To find out more information about Flexible Solutions and our products please visit www.flexiblesolutions.com
If you have received this news release by mistake or if you would like to be removed from our update list please reply to: info@flexiblesolutions.com
FAQ
What is the recent announcement by FSI about?
How much did FSI invest in the new production line?
What is the production capacity of FSI's new vial filling line?
Why is FSI entering the drug compounding market?
What are the risks associated with FSI's new venture?
When will FSI begin generating revenue from this new project?
What steps is FSI taking to mitigate risks in this new venture?
