Alexium International Group (ASX:AJX, OTCQX:AXXIY) expects purchase orders for its speciality chemicals to grow as several potential customers moved to the next stage of the development cycle.,
This could not come at a better time given that most effective fire retardant coating chemistries are now banned or being withdrawn from the European and U.S. markets.
The market for FR chemicals is expected to grow to $7 billion in 2017.
Its products (specifically the home furnishing fire retardant treatments Polytron™, Omnitron™ and Bactron™) are all in the development cycle with key multi-million dollar U.S. companies.
Besides assisting and co-developing the technology by providing market-driven feedback, the companies are also moving into the next stage of the development cycle, which will require larger quantities of the company’s chemicals.
This is expected to result in purchase orders for drum quantities of its chemistry.
This could drive revenue growth in the near-term.
Alexium is in the midst of over a dozen development/trial projects with potential customers across the product spectrum. Each of these represents a significant ($0.5 million) per annum average revenue opportunity.
The company is progressing formal negotiations with customers on longer-term commitments while the successful soft launch of its Phase 2 sales campaign will fill the development pipeline.
Continued co-development is also underway with various divisions of the Department of Defense (DoD) on flame retardant solutions for military applications.
June Quarter update
During the last quarter, the company completed distribution and supply agreements with Euroflam and iTextiles.
These agreements commenced 1 May 2014 and initial invoices for the quarter totalling approximately $90,000 have been raised and are awaiting payment.
Initial payments have been received with the remainder due to be received in the next week after banking activity resumes at the end of Eid Holidays in Pakistan.
Alexium also generated over 30 high importance leads – 12 of which have resulted in development/trial projects - after exhibiting for the first time at the only North American show dedicated solely to technical textiles.
This was a large leap forward by providing product face time with key multi-million and billion dollar companies seeking environmentally friendly FR solutions as well as building brand awareness.
The ongoing development of its products (specifically the home furnishing fire retardant treatments Polytron™, Omnitron™ and Bactron™) with key multi-million dollar U.S. companies is also ongoing.
These companies are assisting and co-developing the technology by providing key market-driven feedback as well as key testing requirements on the small lab scale.
Feedback from these companies has been extremely positive and these lab scale tests have confirmed that Alexium has the desired FR solutions for the appropriate markets.
The lab scale tests have also concluded that Alexium chemistries can be combined with the customer’s technologies to provide a finished product to the end users.
In addition, Alexium’s UK partner Euroflam has completed a successful large-scale run of its chemistry and is currently sampling fabric (treated with both Polytron™ and Omnitron™) to their key customers.
The feedback from Euroflam and its customers has been resoundingly positive and larger orders are expected to follow.
A toll manufacturer is being sought to meet European demand for its products.
Cash at the end of the quarter was approximately $4.2 million.
Alexium’s products offer advantages that make them superior to other flame retardant options.
Its treatments can convert flammable fabrics – even those with high synthetic content – into soft fabrics that self-extinguish and do not melt or drip.
These are suited for the most demanding applications in the industrial workwear, furnishing or military markets.
They are also compatible with other fabric treatments such as antimicrobials and stain repellancies.
Treatments for the military and workwear markets require a pre-treatment with an FR cotton treatment process.
Markets targeted include topical FR treatment for Nylon, where no directly comparable technology or product is available; treatment for Nylon Blends that competes with high-cost aramid-blends; the treatment for polyester blends - the most used synthetic fibre in the world; and treatment for polyester.
The company's intellectual property portfolio is also growing with Over 20 patents in 9 different countries. A further 3 patent applications have been made regarding FR Chemical treatments, and flame retardant emulsions.
Many of the most effective FR coating chemistries are now banned or being withdrawn from the European and U.S. markets.
This is due to increased concerns regarding environmental effects of some of the most effective FR solutions as well as evidence of toxicity and bio-accumulation of halogenated compounds and carcinogens.
New legislation passed in Europe and the U.S. also severely restricts or eliminates the use of a number of brominated/halogenated compounds.
In contrast, Alexium’s FR coatings are environmentally friendly and contain no harmful compounds that exist in other products.
Currently, about 40 million tonnes of FR chemicals are sold annually. This is anticipated to grow into a $7 billion market in 2017.
Alexium’s patents and trademarking key aspects of its FR technologies hold the key to Alexium.
It has a patent pending on the core chemistries that are used for Nycolon™, Nuvalon™, Polytron™, and Omnitron™. This provides patent protection for our “Alexiflam™” brand of products.
This IP portfolio will serve as the foundation for the company.
Catalysts and milestones in the next quarter are significant including:
- Several potential customers move to the next step of the development cycle, purchasing of significant quantities of chemistry for large-scale runs;
- Also expected are formal negotiations with customers to agree on longer-term commitments with Alexium;
- Successful soft launch of our phase 2 sales campaign to fill the development pipeline;
- Continued co-development with various divisions of the Department of Defense (DoD) on flame retardant solutions for military applications.
With further purchase orders expected to follow as several potential customers moved to the next stage of the development cycle, Alexium is poised for growth.
The company is also in the midst of over a dozen development/trial projects with potential customers that resulted from its attendance at North America’s only show dedicated solely to technical textiles.
Each project represents a significant ($0.5 million) per annum average revenue opportunity with small sales quantities on all products already being booked for the upcoming quarter.
While the sales process has taken longer than expected due to the clients’ requirements, larger revenues are coming in soon with potential for more.
The market for fire retardant chemicals is projected to grow to $7 billion in 2017 and with many other effective FR coating chemistries now banned or being withdrawn, Alexium is well positioned to grow.
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