Zoono (ASX:ZNO): After falling back to Square One, is it for real this time? Its 60% share price spike could be telling

Zoono (ASX:ZNO) shares spiked over 60% on Tuesday (May 20). After a few years of being forgotten, this company is back in the spotlight.

Remember Zoono?

This company was amongst the stories of the pandemic, skyrocketing from under 10c per share to over $2 per share in a manner of months – making it over $300m. The reason? It had sanitisers that could purportedly work against COVID-19, and so demand took off.

Zoono’s technology is actually a molecule that has a unique ‘cel popping’ technology proven to remain active for up to 24 hours on the skin and up to 30 days on surfaces.

Unfortunately, things started going downhill in September 2020 when the company was forced to formally deny claims its formula protected against COVID after some of its high-profile customers claimed it to be the case, thus attracting regulators’ attention.

In defence of the company, it did undertake testing that demonstrated that its products had efficacy and were durable, and there’s no suggestion there was no testing. Nonetheless, it appears the company’s claims got too specific for regulators’ liking. By July 2022, 2 years after Zoono’s all-time high, shares were back below 15c once more.

Is it for real this time?

For some months now, Zoono has had a relationship with OSY, which invested $0.37m about a year ago and also signed an Exclusive Agency Agreement. Osy is a British company that is developing technologies to extend the shelf-life of foods, particularly soft fruits. It is estimated that up to a third of all food worldwide is lost due to inadequate harvesting, storage and transport. This leads to 6-8% of global greenhouse gas emissions and costs US$1 trillion, but it could be enough to feed 1.26bn people.

OSY and Zoono developed a unique application technology coat which permits Zoono products to be applied efficiently and efficiously during the production process to the surface of packaging materials used for soft fruits.

In March last year, the company signed an initial 5-year deal giving exclusivity in the UK, EU and rest of the world excluding China and India – but with a first right of refusal for those two countries. It provided for minimum customer purchases of NZ$2.6m in the UK alone. Only a matter of weeks later, OSY signed its first major supermarket chain and said this would count towards achievement by OSY of its minimum sales benchmark.

Although the company provided little running commentary of what was going on, something right must have happened. Because it and OSY signed an exclusive agreement with Sharkpak, the UK division of a leading European manufacturer of packaging solutions for the food industry (Groupe Guilin SA in case you were wondering). It provided for a 5-year term for the UK only but for NZ$4.3m minimum annual purchases in Year 1 with this figure rising in subsequent years to peak at NZ$8.6m in year 5.

Investors were advised that the first product order would be received when in-store trial processes with UK supermarkets conclude later this calendar year, and that revenues would increase as Sharkpak would ramp up production.

Our take

It appears Zoono may have a future ahead of it, albeit a different kind that investors may have thought of 5 years ago. It may be accepted that food waste is a problem and solutions like Zoono’s could help.

But of course, this deal is at an early stage and revenues may not be reflected for some months yet. And so don’t expect it to surge to over $2 per share again, at least not any time soon. Unless of course there is another pandemic. Apologies to Regal and its shareholders for our skepticism.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips