BioGaia still in the red

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Delayed contracts have held back growth at Swedish probiotic
developer BioGaia, which had been aiming to produce a profit this
year.

As announced in a warning at the end of last year, two new contracts planned for the final quarter of 2004 were postponed to the first half of this year.

A French beverage company is planning to introduce drinks with BioGaia's patented screw cap 'LifeTop Cap' and a Chinese dairy will launch a milk drink with the LifeTop straw.

BioGaia, which sells licensing rights to its Reuteri bacteria and novel delivery systems for probiotics, said sales to dairy and infant formula customers increased 13.4 per cent to SEK40.4 million (€4.4m) but its margins have been reduced after a change in selling strategy.

The company now gains a larger share of product revenues but a lower share of royalties than previously. A new representative in Hong Kong and an oral health initiative also lifted selling costs over 2004, pushing operating profit down to SEK-28.8 million.

Losses have almost doubled over the prior year (to SEK-23.25 million) partly due to a reversal of warranty provisions worth SEK 11 million in 2003 compared with SEK 4 million in 2004. Excluding this item, the net result declined by SEK 3.2 million compared with the previous year due to a drop in operating profit and interest income.

The company said it will continue to focus on reaching profitability.

"In view of the company's strong portfolio of innovative products, successful clinical trials and distribution network covering a large share of the key markets, BioGaia's future outlook is bright,"​ it said in a statement.

BioGaia recently reported on the benefits of a probiotic chewing gum for gingivitis. It has launched trial sales of the gum and lozenges to dentists in Sweden's Skane region, and could be the first firm in the world to offer a probiotic chewing gum.

The venture is expected to make a positive contribution to future earnings.

BioGaia says its sales have risen by an average 36 per cent annually since 2001. A wider product offering from existing partners should expand sales further.

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