Restructuring beginning to pay off for Zila

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Related tags: Chief executive officer

Zila, the US-based pharmaceutical and nutraceutical producer, said
it remained confident that EBITDA would grow significantly next
year after major restructuring of the business during the final
quarter of 2002.

Zila, the US-based pharmaceutical and nutraceutical producer, said it remained confident that EBITDA would grow significantly next year after major restructuring of the business during the final quarter of 2002.

Sales in the final quarter of 2002 were $8.8 million (€9.1m), a slight decrease from $8.9 million a year earlier, while earnings before interest, tax depreciation and amortisation (EBITDA) rose from a loss of $1.2 million to a respectable profit of $200,000. However, net losses increased from $1.0 million to $1.4 million.

Zila's president and chief executive officer Doug Burkett said: "In the fourth quarter we were able to obtain sufficient profits from our pharmaceutical and nutraceutical businesses to fund the OraTest clinical trial and still achieve positive EBITDA from continuing operations. This represents a significant improvement over the previous quarter. With our current cash position and more than $4 million available on our line of credit, we are well positioned to grow our core businesses. Our goal is to produce positive EBITDA and growth in fiscal 2003."

The positive results for the final quarter, despite the increase in net losses, were attributed to a change in company strategy following a management reorganisation. Zila is now focused clearly on its core strengths in pharmaceuticals (where it owns brands such as Zilactin oral healthcare products and OraTest oral cancer detection products) nutraceuticals (its Inter-Cal division makes Ester-C branded products and Palmettx saw palmetto extract) and biotechnology.

Cost reductions and the ending of unprofitable product lines also contributed to the improvement. The sale of the company's mail order dental supply business for approximately $4 million cash helped Zila pay off the $2.5 million outstanding on its line of credit.

The bullish outlook for 2003 is based on the new management's strategy of increasing investment in marketing for Zilactin and Ester-C products, as well as extending its OraTest clinical trial. Some $700,000 was invested in the trial in the final quarter.

"Beginning with the current first quarter of fiscal 2003, we will segment the company's financial reporting, providing a clearer look at the profitability of our core pharmaceutical and nutraceutical businesses, while breaking out the investment in our tolonium chloride biotechnology,"​ Burkett said. "We believe this will provide investors with a better understanding of the Company's financial position."

For the year as a whole, Burkett said that Zila​ had lifted revenues by 12 per cent to $35 million, while pre-tax losses of $7.5 million compared to losses of $6.5 million a year earlier, due primarily to increased costs relating to the launch of a new product and reduced profitability for Zilactin.

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