Arcadia Biosciences, Inc. (NASDAQ:RKDA) shares soared higher on Monday following news the firm has signed a deal for commercialization of its high fiber resistant starch wheat in key wheat markets, including North America, Europe and parts of Asia, and, separately, it also announced succession plans for its chief executive officer.
In afternoon trading, Arcadia shares were 28% higher at US$8.28.
In Monday’s first statement, Arcadia announced a binding term sheet agreement with Arista Cereal Technologies and Bay State Milling Company under which Bay State Milling will become the exclusive commercial partner for Arcadia's high fiber wheat in North America under Bay State Milling's HealthSense brand portfolio, while Arista receives exclusive rights under Arcadia's intellectual property in Australia, New Zealand, Europe, Japan and South Korea.
READ: Arcadia Biosciences expects to “significantly scale revenues in 2020” as it posts second quarter numbers
Arcadia said it will continue to market its high fiber wheat under its GoodWheat portfolio of specialty wheat ingredients in other international markets.
The agreement resolves an intellectual property dispute between the three companies over Arcadia's high fiber wheat, the company added, and will see it earn royalties for sales of its wheat varieties in North America by Bay State Milling, plus additional considerations.
Raj Ketkar, president and CEO of Arcadia Biosciences said: "We are pleased to have entered into an agreement with Arista and Bay State Milling that will accelerate commercialization of our high fiber wheat in key wheat markets – and capture revenue in 2019 and beyond.”
"Bay State Milling is an excellent partner for North America, bringing its strengths in milling, identity preserved supply chains and technical support of customer food companies," he added.
Significantly higher amounts of dietary fiber
Arcadia's high fiber wheat delivers multiple times the resistant starch as traditional wheat and significantly higher amounts of dietary fiber than traditional wheat flour.
Because of its high fiber content, consumer product goods companies, food manufacturers and food service retailers can reduce the need to add other sources of fiber in their formulation and simplify their ingredient labels.
In 2015, the global flour market was valued at $200 billion and is estimated to reach a value of $270 billion by 2022. The United States Department of Agriculture reported the total value of wheat production in the U.S. was $9.7 billion for 2018.
Peter Levangie, president and CEO of Bay State Milling commented: “We are excited to add Arcadia's high fiber wheat to the HealthSense brand and bring it to customers to help close the fiber gap and improve consumer health in North America."
CFO steps up to top job
In a separate statement, Arcadia also announced that Ketkar will retire effective September 1, 2019.
In line with its succession plan, the company added, its board has appointed the group’s chief financial officer, Matthew Plavan to Ketkar as chief executive officer. In turn, Plavan is succeeded by Pam Haley as Arcadia's new chief financial officer.
"I personally, and on behalf of the Board, want to thank Raj for his leadership at Arcadia," said Kevin Comcowich, the company’s chairman. "Raj has built a strong executive team and robust commercial capabilities, leaving Arcadia well positioned to execute the commercialization of our product portfolio."
He added: "We are pleased to welcome Raj's successor, Matt Plavan, to the board and appoint him CEO of Arcadia. During his tenure with the company, Matt has proven to be a strong, dynamic and innovative leader. We are confident he is the right person to lead this next phase of Arcadia's transition from an R&D focused company to one with growing commercial sales."
Plavan commented: "Our commercial progress thus far in 2019, punctuated by our Arista wheat collaboration announced today, has illuminated our path to new revenue generation. With global distribution channels set for our flagship GoodWheat ingredient— high fiber resistant starch wheat—and our acquired experience with hemp in the lab, the field and in the product markets, we now have a clearer view on the timing and scale of incoming revenues. In fact, we believe these revenues are imminent and could scale significantly from our current levels.”
"As a result, we can with confidence provide our investors financial guidance to better align market expectations for growth and value creation at Arcadia," he added.
The incoming CEO continued: "Specifically, in 2020 and 2021, we expect total revenues will exceed $10 million and $30 million, respectively. And, with this revenue trajectory, we expect to begin generating net cash from operations in mid-to-late 2021.”
Since joining the company in 2016 as chief financial officer, Arcadia said, Plavan has played an instrumental role in shifting the company's focus towards crop innovation and commercialization. In February, he was named president of Arcadia's new strategic business unit devoted to hemp, Arcadia Specialty Genomics.
Prior to joining Arcadia in 2016, he served as CEO and board member at Cesca Therapeutics.
Haley, joined Arcadia as accounting manager in 2005 and has held several key positions, most recently controller.
Arcadia Biosciences develops and markets high-value food ingredients and nutritional oils that help meet consumer demand for a healthier diet. It’s GoodWheat branded ingredients deliver health benefits to consumers and enable consumer packaged goods companies to differentiate their brands in the marketplace.
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