Canadian firm Forbes Medi-Tech is to receive a US$3 million advance payment from Phyto-Source LP, its manufacturing joint venture with Chusei. The payment is towards a US$4 million loan made by Forbes Medi-Tech during the formation of the sterol manufacturing venture.

The sum will be used to fund further research on Forbes' VPx library of compounds and the payment of approximately US$1.0 million to Novartis towards the settlement of the Master Licence Agreement announced in June 2002.

Forbes said it now expects to have enough funds to operate through the end of 2004.

The financing shows Phyto-Source's growing financial strength as sales and production capabilities increase. The remaining $1 million owed to Forbes will be gained through future sales of Phyto-Source's sterol-based ingredients. The transaction is subject to preparation and execution of formal loan documentation and such regulatory approvals as may be required and is expected to close on or before August 30.

"With no dilution to shareholders and the favourable terms provided, this financing offers the best possible solution to meeting our capital requirements," said Charles Butt, president and CEO of Forbes Medi-Tech. "Given the growth of our nutraceutical business, we will continue to benefit from this strengthening source of revenue," he said.