Forbes grows Reducol sales, is upbeat despite expenses
branded sterols in Q2 2006 by 32 per cent compared to last year,
but losses deepen with dearer development, marketing and sales
costs.
For the third quarter of 2006, Forbes has reported revenue of almost $1.7m. Since Forbes exited its phytosterols production joint venture with Chusei in February, this business is presented as a discontinued operation for the latest quarter. The company has reclassified the $1.6m income it received from that source in the same three months of 2005 for the sake of fair comparison.
Forbes' Reducol branded sterols business has now become the company's main source of income, and in the latest quarter developments have centered on growing the brand's presence in Europe.
A cheese containing Reducol has launched at Walmart-owned UK supermarket Asda, owned by Walmart; a range of products using the ingredient has started appearing on shelves in Albert-Heijn, the largest retailer in The Netherlands; and a joint venture has been formed with the UK's Fayrefield Foods, known as Forbes-Fayrefield, with the intention of building distribution for the branded ingredient in the continent.
The present focus could be judicious given that Frost & Sullivan estimates that the European phytosterol's market will grow by around 114 percent over the next six years, from its 2005 value of US$ 184.6m.
But the signals are that sterols will be performing well in the US, although starting out from a smaller base. Frost valued the market at US$103.9m in 2005 and estimates that it will reach $196.7m in 2012.
And it seems that Forbes is not blind to the opportunities on this side of the Atlantic.
"With additional product launches anticipated for the latter half of 2006, Forbes will continue to leverage the increasing international recognition of Reducol in order to develop business opportunities in additional markets such as the US," it said.
The company's growing losses - from $6.1m in Q3 2005 to $7.6m this year - are attributed to expenses. The cholesterol-lowering drug FM0VP4 is in phases II clinical trials, but R&D expenses amounted actually fell from $3.6m to $3.1m.
General and administrative costs rose by 12 percent to $2.7m, however; marketing, sales and product development by 78 per cent to $0.7m; and cost of sales by 48 percent to $1.1m - although having recently entered into a long-term supply agreement it does expect to achieve better cost of sales over time.
The company does expect to continue reporting operating losses as the FM-VP4 project progresses, but president and CEO Charles Butt is upbeat about the prospects.
"The continues expansion of Reducol-based products coupled with the pending trial completion for FM-VP4 and a strong financial position, provide and excellent platform to build awareness for Forbes Medi-Tech within the investment community," he said.
