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CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" Its’ uniqueness in plant
extraction Naturol Inc. Interview conducted by: Bio of CEO,Paul McClory is
an international businessman who has spent most of his career developing and
commercializing new technologies. Based in London he has business interests in
Europe, USA, Canada, Asia and Africa. He was a founding shareholder and director of
AMR, now a substantial player in rare earths in China and listed on the Toronto Stock
Exchange. In the 1990’s he played a key role in identifying industrial
applications for Kenaf, a fibrous plant now used to produce car parts for Ford’s
Visitor Division in Indiana. Mr. McClory is
also a director of Sustainable Projects Development Group in England which is developing
an agro industrial business in Spain based on the manufacture of bio-composites using
Kenaf and other fiber crops for the auto industry. Paul McClory
founded Naturol in 1998 to develop alternative, innovative, cost effective proprietary
technologies for the extraction of valuable oils and bioactive compounds from plants for
the pharmaceutical, nutraceutical, food, flavour and fragrance industries, whose
extraction technology has changed little over the past one hundred years. CEOCFOinterviews: Please explain to my readers about Naturol, Inc. Mr. McClory: Naturol, Inc is the North American licensee for
unique new plant extraction technologies, using novel solvents, developed by Naturol
Limited in England. The technology is now entering into its commercial phase in
North America. The technology involves the extraction of valuable bioactive
compounds and oils from plants. Few people, outside the industry, know that the extraction
of oils and bioactive compounds from plants is a multi billion dollar global business,
growing every year, especially in the United States and Western Europe. The technology used
for the extraction of these oils and compounds has changed little in the last 100 years.
We believe that Naturol's technology is better, cheaper and safer than any competing
technology in the world today. We are now commercializing our technology in the
United States and expect to be in revenue this year and in profit in 2003. Our corporate
objective is to become the world's leading supplier of plant extraction technology within
the next five years and, based on the evidence we have, I believe we have every chance of
achieving this. CEOCFOinterviews: One of the oldest methods in use, I think, is
steam distillation? Mr. McClory: Yes, that’s right, steam distillation, which has
been around for over 1000 years, is still common in developing countries such as India,
China and South America. The production of products made by distillation is a pretty
messy business. It is very energy intensive, produces large amounts of polluted
material and inferior products because the plant products are all boiled, for these
reasons it is not in wide use in North America and Europe. CEOCFOinterviews: How does your technology compare to widely used
solvent extraction systems in America? Mr.
McClory: About 100 years ago The U.S. and Europe started to
adopt solvent extraction for plant oils and compounds. A simple solvent extraction system
you would be familiar with is the way a dry cleaner works - there a liquid solvent goes
through our clothing and takes out all kinds of stuff, it is not much different with
plants, which, as you will see is becoming a problem. The solvent most popular in
the United States is called Hexane. This is a
dangerous, petroleum-based, solvent which is highly flammable and therefore needs a great
deal of protection while it is in use. It is also a known carcinogen, a VOC
(volatile organic compound) which can cause many health problems when released in the
atmosphere. Hexane also leaves small residues in everything it extracts, which of course
are consumed in pharmaceutical, nutraceutical, food, flavor and fragrance products every
day by millions of people. Naturol's
technology is quite different from Hexane. Although it is based on solvent extraction, it
uses a new group of Eco friendly solvents developed in recent years to replace ozone
destroying CFC's. Our solvents are non-flammable, much safer than Hexane and leave
significantly less solvent residues in our plant extracts than hexane. Of crucial
commercial importance is that we can make far better products at a lower production cost
than hexane. The trigger for the development of these new solvents was the Montreal
conference in the 1980’s where the world decided that dumping CFC’s into the
atmosphere was destroying the ozone layer and had to come to an end. A number of
completely new solvents were developed for common uses such as refrigeration and auto air
conditioning. Our chief scientist, and the prime inventor of the Naturol technologies, Dr
Peter Wilde, had the novel idea using some of these new solvents to extract oils and
bioactive compounds from plants. We found that these worked spectacularly well and have
now a significant number of both issued and applied for patents protecting our technology. CEOCFOinterviews: Who do you consider now as your main competition? Mr. McClory: The most modern and recent development in plant
extraction technology is called Supercritical Carbon Dioxide, or CO2. CO2 extraction
is used today mainly for the decaffeinating of coffee and, I think, it is also used for
the extraction of hops for the international beer industry. CO2 systems produce product
extracts that are comparable in quality to Naturol's technology. However, the
capital cost of a CO2 system is incredibly high. This is because it operates at very very
high pressures. CO2 systems operate at pressures that are equivalent to being about three
miles deep underneath the ocean! The pressures that Naturol technology operates at is
equivalent to the pressure inside a champagne bottle. So it's easy to see why our
systems are much easier and cheaper to build. CEOCFOinterviews: Is Naturol Inc in commercial use now? Mr. McClory: No. As I said, we are, after a number of years of
developing our technology, entering the commercial exploitation phase this year. But we do
expect to have some revenues this year and to be quite profitable next year. CEOCFOinterviews: It’s a big market for you to be addressing
and I think that the toughest thing you need to do is to prove that your system works and
prove that it works in all of the product areas you are targeting. Mr. McClory: Well, about a year ago or so I would have agreed with
you what has surprised me is that I thought we would have to do a lot of pushing to get
market attention. Just the opposite is happening. We now find that we are being
market pulled and almost every week we are approached with a new business opportunity. And
we have done no publicity, until now, or done any advertising. I think a key reason for
this is that we are one of those rare, and lucky, companies that are in the right place
with the right technology at the right time. A big reason for this is the general desire
in the industry to move away from having to use hexane. And as we are also the lower cost
producer this has to be attractive. As to our
technology working. We have no problem in demonstrating this and, because of the modular
way in which our process works, we have no difficulty in scaling up to meet almost any
production need. We also achieve great economies of scale when we do this. We have also
been lucky in meeting and developing a close relationship with a group in Canada called
the Food Technology Centre (FTC), based in Prince Edward Island. The FTC is a
government owned institution which focuses on developing innovative products for the food
industry. They and Naturol are working closely together to develop very specific
commercial uses of our technology. CEOCFOinterviews: What markets are you going to address first? Mr. McClory: We have decided to focus in the immediate future on
plant derived pharmaceuticals and nutraceuticals., which are used in the anti-cancer drug
Paxetaxol. In the
pharmaceutical arena we are very hopeful that next year, in association with our partners
at FTC on Prince Edward Island, we will be producing taxanes from Canadian yew
trees. It just to happen that Eastern Canada has one of the greatest biomass resources in
the world with high concentrations of taxanes. Taxanes are the
precursors for a very important anti-cancer drug called Pactlitaxel; this is sold,
for example, by Bristol Myers under their brand name “Taxol”, whose sales of
this drug last year were, I believe, around $1.5 billion. We expect to become a
significant producer of yew extracts containing small percentages of taxanes. We will sell
these extracts to a number of pharmaceutical companies who will refine them into a high
purity Pactlitaxel, which sells for around $400,000 a Kilogram. Nutraceuticals
and dietary supplements in the United States have a market size, according to Frost and
Sullivan, of about $6.7 billion in annual sales. This figure is expected to grow
exponentially to an amazing $21 billion by 2007. This tells you that
Nutraceuticals is a huge and growing market. As most of these supplements depend on some
kind of plant extract for their active ingredient, we expect to take a useful part of this
market over the next five years. On the
Nutraceutical side we have found in the last month or two that we can produce pure Lutine
from the marigold flower. There is growing evidence that Lutine benefits
elderly people suffering from a condition called Macular Degeneration. This is one of
principal causes of blindness in an estimated 13 elderly Americans. We see lutine becoming
a part of the daily diet for middle aged people. Just a few weeks ago the Sunday
magazine edition of New York Times contained an eight page section devoted to
Macular Degeneration, and one of the advertisers, a major pharmaceutical company, took a
full page with a headline saying “when it comes to healthy vision, keep an eye on
Lutine”. Naturol has the opportunity of becoming one of the world’s lowest
cost producers of lutine. Another
Nutraceutical we are working with is called Saw Palmetto, a plant extract increasingly
used by middle aged men to relieve their prostate condition. This market already has
retail sales of about $100 million a year and we know that we can produce very high-grade
extracts using our technology, which are more than competitive with current production
costs. CEOCFOinterviews: Is that when you will be able to start to see
some revenues? Mr. McClory: That is on the pharmaceutical side, but on the
nutraceutical side we hope to see some revenues this year and I can’t tell you that
but it is looking like we might. And that is going to come either from leutine
itself or from saw palmetto. CEOCFOinterviews: How strongly are you going to rely on your
alliances? How important are they to your company? Mr. McClory: Our product development alliance and the heart of our
company is good technology with very good research back up and patent protection, that is
our particular strength we are going to seek alliances and are speaking to some
significant companies in the United States and we will be talking with more that are in
certain areas that we will be able to assist because we believe absolutely that our
technology will give them cost, quality and safety benefits that they do not have access
today. Our strategic
object is to continue to develop the best plant extract technology in the world combined
with the lowest production cost, and then joint venture or license with established
manufacturers or distributors that have market share in specialist niche markets.
With our quality products and lower costs we offer them an improved market position and a
bigger bottom line. CEOCFOinterviews: With no profits now how is this company staying
afloat? Mr. McClory: To this point we have funded the company
with private money. Now that we are aggressively entering the commercial arena we need to
raise some new working capital. This is why we
have chosen to, initially, list Naturol Inc on the OTCBB (symbol: COOX), and, until we get
regulatory approval for a name change, the company is still called Coronado Resources. Our plan is to
raise about $1.5 million this year and about $3 to $5 million next year. We have a very
modest burn rate and we see ourselves as a low risk company. Our real need for capital
will come when we need to fund our participation in joint ventures. CEOCFOinterviews: How much is this company spending in R&D? Mr. McClory: Very little, because we’ve done just about all of
the “R” and are now just doing the “D”. As far as future product
development goes we expect most of this to come from our partners at the Food
Technology Centre. And through them we have recently received a technology validation
grant of C$ 225,000 from
Canada's National Research Council over the balance of this year, our contribution is
about a C$100,000. The reason they are doing this is our technology will be able,
through the FTC in Prince Edward Island, to upgrade the bioresources in that region.
However, the benefits of the technology that is developed there will flow into Naturol
Inc., we will own and commercially exploit all the intellectual property and FTC
will receive royalties for their inventions. CEOCFOinterviews: Now, I know in one area I was reading in
your website it says that revenues will be from strategic alliances and acquisitions.
We’ve spoken about strategic alliances, but what about acquisitions? Mr. McClory: I would guess that in a year or two out from now there
will be an opportunity perhaps to acquire one or more well established small to medium
sized companies that have a very good customer base in market sectors of great interest to
us. It seems logical to us that such companies, already generating profits and with a good
reputation, would benefit greatly by joining forces with Naturol to lower their customer
costs and increase product range and quality. CEOCFOinterviews: What would you say to a potential investor
looking at this company for the first time? Mr. McClory: I think any investor looking into acquiring a position
in Naturol Inc., or, for the moment, Coronado Exploration, should first look at the
staggering growth of Nutraceuticals, the word is combination of nutrition and
pharmaceutical, and wonder how to get into it. Why is the use
of Nutraceuticals exploding in the United States and Europe ? I believe the main reason is
that millions and millions of people are now looking at ways to prevent future diseases
rather than wait for them to happen. As an example, I have previously mentioned lutine for
treating macular degeneration, blindness, a condition affecting over 13 million United
States citizens. By taking lutine around the age of 40 or 50 in the regular diet,
there is a fair chance that you will at least alleviate the onset of macular
degeneration and may actually stop it. Another example is Saw Palmetto. Rather than
taking a ethical drug with various side effects, Saw Palmetto is a natural product that is
becoming an increasingly popular dietary supplement for treating the male prostate.
You then have to
ask yourself, as an investor, if all of these things are extracted from plants who are the
companies that are going to be the winners? You would certainly expect that among the
winners would have to be one or two of the companies that produce the plant extracts that
are driving this multi billion dollar market. The company that can produce these products
at the same high quality that the industry is used to and a t a lower production cost must
be a good candidate. We absolutely believe that, providing we raise the capital we
need that there is every chance that we will be one of the big winners in this arena. CEOCFOinterviews: You were saying more and more people in the
United States are turning from drugs to taking supplements. Mr. McClory: It is now obvious that alternative medicine is
becoming seriously accepted by the average consumer. The market will become more and more
biased towards naturally derived plant based compounds which act in a neutraceutical
manner. And as we get ever closer to learning why these compounds work in the way they do,
the market can only get bigger. CEOCFOinterviews: The world is becoming more and more aware of what
is around. Mr. Mcclory: Especially by an aging population. If I can come back
to the independent Frost and Sullivan report I mentioned earlier: The market today for
nutraceuticals and dietary supplements is worth an estimated $6.7 billion and in
five years from now that is expected to grow to $21 billion annually. CEOCFOinterviews: Do you have any closing comments for my readers? Mr.
Mcclory: Our ambition is to become the worlds leading technology company in the
production of high grade, low cost plant extracts in the next five years. We do not suffer
from complacency and have looked around the world for competitive technologies as good as
ours. We have found nothing to compete with Naturol technology. |
