PharmaZen rationalisation - company back in black

19 March 2007

PharmaZen rationalisation puts company back in black

Biotechnology company PharmaZen has signalled it is back on track, posting an operating profit of $799,613 on improved turnover of $6.29 million for the year ended October 31, 2006.

The result is before tax of $210,968 and non-recurring expenses of $992,364 resulting from the closure of the company's Dunedin operation and associated stock write off.

During 2006 PharmaZen closed its Dunedin production plant and quit development of its animal remedy products, which are now manufactured under contract and traded via the Waitaki Biosciences divisional infrastructure.

Post tax and non-recurring expenses resulted in a net loss of $92,898 (deficit of $182,724 in the previous corresponding year).

Craig McIntosh, chief executive of PharmaZen, said directors were pleased with the result, which was achieved in trading conditions made difficult by the ongoing strength of the dollar and problems associated with recovering sales lost in plant problems at Christchurch in 2005.

During the period under review, the Waitaki Biosciences plant at Christchurch was upgraded, significantly increasing the company's capacity. Waitaki manufactures several powder products extracted from a wide range of animal and marine sources. The range includes green-lipped mussel, shark cartilage, natural calcium and Chondroitin Sulphate. The products are used by other companies as a base for animal and human health products, mainly in the areas of bone and joint health, along with immune and digestive support.

"The additional capacity now allows us to not only increase volumes but to broaden the width and depth of both our customers and product ranges," McIntosh said.

"Lack of capacity was a major issue for business as it not only prevented growth but, by limiting the depth of the customer base, made us more susceptible to changes in fortune of individual customers.

"The 2007 focus is continued sales growth through strengthening the international distribution network and adding new products. We have been making progress in both areas with the appointment of distributors in Switzerland, France, Austria and Italy ­ new markets for us."

"The 2006 result was a significant step forward for the company. We go into 2007 with a much improved balance sheet and a production facility, which not only provides the opportunity for substantial growth but has made the company more cost competitive," McIntosh said.

But he cautioned that growth was not a given and, while the board and management were extremely optimistic about the mid to long term opportunities for the company, there remained plenty of short term challenges. "Our commitment is to long term sustainable growth ­ the manufacturing platform is in place ­ but growing sales in a competitive market on a high dollar is a time consuming and challenging task

He said closure of PharmaZen's Dunedin plant was necessary because of continued poor sales and high overheads. The decision to manufacture the core product range under contract was successful.

PharmaZen's annual general meeting will be held on Monday, April 30, in Dunedin.

ENDS

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