Agreements and research push BioGaia towards profitability

Related tags Reuteri Probiotic

A raft of new agreements and some positive study results have
helped BioGaia to report promising results for full year 2005, in
which it edged SEK 8.1m (€0.86m) closer to the point where accounts
turn from red to black.

The operating result was -SEK20.7m (€2.2m), compared to -SEK28.8m (€3.07m) in full year 2004, and net sales increased by an impressive 47 per cent to SEK59.6m (€6.35m).

Three new agreements were announced during the fourth quarter:

A partnership with Chr. Hansen and Urex Biotech takes a probiotic product containing Lactobacillus reuteri​ into a whole new indication area: the restoration and maintenance of healthy vaginal flora.

The product is based on clinical research conducted by Urex, and will be jointly distributed by BioGai and Chr. Hansen.

A five-year agreement with HSO Pharma will make all BioGaia's dental products, tablets and baby drops available in pharmacies and clinics in Austria - the first time the company has a bestowed its complete portfolio on a partner. HSO expects to launch the products in the middle of 2006.

Finally, the company also signed a new agreement with Victus to take Reuteri tables and drops into the US hospital market, indicated to support gastrointestinal health.

Managing director Peter Rothschild said that the US hospital market is still relatively underdeveloped when it comes to probiotics. BioGaia already had an agreement with Victus in place for the distribution of a Reuteri product with Glutamine.

These come on the back of a number of other agreements earlier in the year, for distribution in Hong Kong, in India, and for animal health in Australia.

In Spring 2005 the company was awarded a European patent for the use of Reuteri in pharmaceutical and nutritional products that alleviate dehydration in patients suffering from diarrhoea and vomiting, based on strong results from published clinical studies.

New studies have also added to BioGaia's store of scientific evidence for the benefits of Reuteri, for infants with colic and infection caused by the ulcer bacteria Helicobacter pylori.

However not all news on the study front has been good news.

The decision to write-off a two-year study investigating the effects of probiotics on allergies, in particular eczema, in new born infants took a toll - and the overall impact on the full year was not insignificant.

SEK 10.8 million (€1.15m) was written off in development expenses, and SEK 4.9 million (€0.5m) to reverse provisions for future commitments to pay royalties on future sales of allergy products.

The decision was taken in December 2005, when the results showed that the incidence of eczema in the 232 newborn infants being given BioGaia's patented Reuteri bacteria did not decrease.

"It is of course a disappointment that the study did not show the results we expected,"​ said Rothschild.

However he was able to draw some comport from the observation of reduced wheezing among two-year-old infants. Hay fever and asthma are uncommon in early life and this, he said, and this shows "clear tendencies that should be examined in future studies."

"We are optimistic that a possible follow-up of the study at a later stage will show reduced incidences of asthma and hay fever,"​ he added.

Rothschild also has reason to be optimistic about the results from the early part of 2006. In January it announced an agreement with Switzerland's Novartis to use Reuteri and BioGaia's delivery technologies in the medical nutrition market.

Three distribution agreements were also signed in January for Asia, covering the Japanese, Malaysian and Singaporean markets.

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