Sales and profits drop at Nutraceutix

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Related tags: Pharmacology, Over-the-counter drug

Nutraceutix, the pharmaceutical group which recently signed a
licensing agreement with the giant agrifood group ADM, has reported
disappointing results for the final quarter of 2001.

Nutraceutix, the pharmaceutical group which recently signed a licensing agreement​ with the giant agrifood group ADM, has reported disappointing results for the final quarter of 2001.

Sales for the last three months of the year were $1.1 million (€1.3m), compared to $2.66 million a year earlier. Net profits of $100,514 in 4Q 2000 became losses of $593,295 in 2001. Fourth quarter sales were down 50.7 per cent compared to the third quarter as a result of "the continued slowdown in sales in the nutritional industry as well as the effects of 11 September,"​ the company said.

For the year as a whole, the company reported revenues of $8.2 million, a decrease of 7.9 per cent on the previous year, and a net loss of $573,042, compared to profits of $199,408 for 2000. 2001 revenues included license fees and royalty payments which increased by 140 per cent to $300,000, the company said.

Until the tragic events of the third quarter of the year, Nutraceutix​ had been on track to show improved results. Revenues for the nine months ended 30 September had increased 13.2 per cent above those for the comparable period in 2000, while operating income was $40,156 versus an operating loss of $231,550 for the first nine months of 2000. However, after 11 September, customer's buying patterns were altered and many orders were delayed, with the result that year-end product sales decreased by 10 per cent compared to 2000.

Nutraceutix has two main revenue streams: manufacturing and licensing fees/R&D contracts/royalties. Annual manufacturing revenues decreased 10 per cent from last year. Of that number, annual dietary supplement manufacturing revenues decreased 20 per cent, due to the slowdown in the market. Fermentation annual revenues increased 15 per cent over the previous year as a result of fermentation capacity which was doubled the end of 2000 in anticipation of increased demand. Industry sources note that sales of acidophilus products increased 10.7 per cent in 2001, the company said.

David T. Howard, Nutraceutix' president and CEO, said: "R&D expenses increased to 5.1 per cent of net revenues, which is higher than comparable nutraceutical/dietary supplement companies. This increasing R&D investment was necessary to develop CDT (controlled delivery technology) technologies and facilitated our ability to file four patents in 2001. We certainly believe these expenses were justified as evidenced by our Q1 global strategic alliance with Archer Daniels Midland (ADM)."

He continued: "We implemented several initiatives during 2001, including operating management changes which streamlined the two Nutraceutix businesses, allowing management to concentrate on improving the productivity within probiotics while simultaneously identifying the opportunities in drug delivery. These moves were designed to enhance future sales and profitability in our historic core business, allowing management to focus on our major growth opportunities in drug delivery."

Among the achievements of the year, Howard noted the expanded sales and marketing activities on the higher margin businesses of fermentation and the LiveBac product; the divestiture of non-core businesses, including specialty raw materials, D-glucarate and the Biotal feed additive businesses; the filing of two patent applications covering new products and technologies in the core business of fermentation and LiveBac; the filing of a US patent application on a third CDT platform which may have application on dietary supplements, OTC products and prescription drugs where solubility is an issue; a strategic alliance with Sinphar Pharmaceuticals of Taiwan giving Nutraceutix access to 11 Asian markets for its CDT platform; and the filing of a US patent application for a new low osmolality rehydration sports drink ReHydraid and initiation of discussions with potential partners.

"For Nutraceutix, 2001 can be summed up as a year of change -- one in which our product portfolio was strategically reduced and brought into line with the core competencies of our organisation. The steps taken in 2001 laid the groundwork enabling the redirection of Nutraceutix's business plan for 2002 and beyond.

We are now clearly pursuing two complementary, yet distinct, business opportunities -- probiotics and drug delivery systems. Looking ahead, we expect to deepen our probiotics business, file and/or license additional patents, and actively pursue strategic alliances with OTC and multinational prescription drug companies to commercialise our drug delivery intellectual property portfolio,"​ Howard said.

"Our newly formed alliance with ADM allows us to focus more attention on the $19 billion US market for drug delivery technologies. We now have one of several planned strategic alliances in place which covers the $500 million US soy isoflavone market. With other ADM-Nutraceutix developments, our partnership will allow us to effectively exploit the growing requirement for technology in the multi-billion dollar domestic nutraceutical market."

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