The company has also announced results of a small trial of a new bacterial strain for oral health, a market targeted with strong growth potential. The bacteria are provided in a chewing gum, which will go on sale in a test market in Sweden this autumn before rolling out to other markets.
"Oral health is definitely an area of great interest to BioGaia. We seem to have a very effective product and according to the experts there are no really good alternative treatments. In view of this, we have high hopes for this market," said Peter Rothschild, managing director of BioGaia.
The Swedish company has a large library of different strains and continues to search for better or new strains for new applications, said Rothschild. But the 30-strong firm is not yet generating enough revenue from the strains it currently markets to break even.
Yesterday BioGaia reported sales of SEK20.8 million (€2.27m) to June, down 14 per cent on the previous year's first half, when figures were swollen by large volume sales to Japanese dairy firm Erina - its biggest customer in 2003 - ahead of new product launches.
"Erina stocked up their systems in advance giving us an unusually good quarter in 2003," noted Rothschild. "We're still in the starting-up phase so if we get an order before the end of a quarter or after it has an important impact on the quarterly result. This makes the quarter's performance very misleading."
BioGaia therefore saw lower sales of tablets containing its Lactobacillus reuteri bacteria but increased revenue from dairy products through new contracts, including Lotte Ham & Milk in Korea.
Rothschild told NutraIngredients.com that the firm is concentrating on growing the Asian market, with a new regional manager in Hong Kong planning to maximise the opportunity offered by strong health awareness and the traditional acceptance of probiotics in this region.
BioGaia makes around 35 per cent of its sales from the dairy market and is estimated to hold an 8 per cent share of the total probiotics supply to Europe's dairy companies, according to Frost & Sullivan figures.
It is also expecting two new contracts to come through at the end of year, and a further two in early 2005, including one for infants delivered in oil drops to be distributed in Italy.
A separate function is currently being set up within the company to handle the chewing gum for gum health, expected to make a positive contribution to BioGaia's earnings next year. The launch of the LifeTop Cap, another novel delivery format releasing probiotic bacteria into bottles through a screw cap, is also imminent in a French beverage.
Novel delivery concepts that extend the shelflife of the probiotics offer higher gross margins and mark the company out from its competition.
"We think its an important part of our job to see that it really works, to solve the problems of our clients and get these packets of powdered bacteria into real products," said Rothschild.
Operations to market the chewing gum will however increase BioGaia's expenses, already up slightly as a result of a new marketing tool developed for clients and higher patent costs.
First half losses of SEK13.1 million are slightly higher than than those for the full year 2003. But Rothschild says the current organisation has the potential to generate significantly higher sales.
Results of the double-blind, placebo-controlled study found that chewing gum containing BioGaia's Lactobacillus Reuteri Prodentis significantly reduced bleeding of the gums after two weeks of consumption.
A report for publication in a scientific journal will be completed during the autumn and BioGaia has also filed a patent application for use of the strain for treatment of gingivitis and other oral health problems.