Gradipore's loss slightly higher than expected

Sydney bioseparations specialist Gradipore (ASX:GDP) has reported an operating loss for 2002-03 of AUD$16.7 million, down from an $18.5 million loss the previous year but slightly higher than the figure forecast by the company in May.

While sales revenue increased 65 per cent to $5.5 million for the 2002-03 financial year, operating expenses remained high -- $23.2 million, almost the same as the previous year.

The company said it had enough cash to last it another 12 months, but admitted it was "extremely conscious" of the decline in its cash balance and warned that it was unlikely to achieve positive operating cash flows by the end of the 2003-04 year.

In a statement, Gradipore executive chairman Jeremy Davis said Gradipore's financial performance was expected to improve in the current financial year.

He reiterated that problems with getting the company's signature Gradiflow instrument and electrophoresis gels to market were largely to blame for the loss, along with restructuring costs.

In January, Gradipore laid off 15 per cent of its workforce. US-based CEO Robert Lieb resigned in April, after which the company revised its anticipated loss for the 2002-03 year from $12 million to $16 million. The company remains without a CEO.

"We anticipate the significant restructuring initiatives taken during the year, including the reduction in our workforce... will enable the company to reduce operating costs in the current financial year by at least 30 per cent," Davis said.

Chief operating officer Tim Wawn said Gradipore was in a transitional phase.

"The bad news on our losses was due to our focus on large-scale areas," he said. "But that doesn't mean the technology doesn't work, and our strategy now is a more logical one."

That included focussing on niche markets for Gradiflow, such as hyperimmune products and chirals, and targeting key markets such as proteomics for the research version of the instrument.

Work with Texas A&M University had proved beneficial as Gradipore was gaining a good name among large drug firms for its ability to separate complex proteins, Wawn said. Meanwhile, the company was expanding its US-based team sales and marketing team.

During the last year, Gradipore stated a commitment to three primary business streams -- the Gradiflow instrument, gels and diagnostics.

Gradiflow faced "a difficult global environment", the company admitted, "characterised by over-capacity and industry rationalisation" in the blood fractionation market. The gels business suffered at the hands of "production process issues", but recovered to record a 60 per cent sales increase. Meanwhile, the diagnostics business recorded sales of $3 million, up 20 per cent on the previous year.

Wawn said the company's five-month-old CEO hunt was still progressing, but that the company's recent nomination of Sirtex pioneer Colin Sutton to the Gradipore board was "a vote of confidence" in the company.

Gradipore's year

• September, 2002: Jeremy Davis appointed chairman. Company signs agreement with Canadian hyperimmune product specialist Cangene.
• January 22, 2003: Citing a revenue shortfall, Gradipore implements 15 per cent staff cut, mostly at its Sydney HQ. Former executive chairman John Manusu steps down (remains as non-executive director
• February 6, 2003: Experiments at the Scottish National Blood Transfusion Service demonstrate Gradiflow effectively removes infectious prions from human blood.
• February 13: Gradipore signs with Hong Kong company Advantek Biologics to apply Gradiflow technology to biosafety of plasma fractions.
• February 25: Half-year results show 26 per cent sales increase, but company casts doubt on its ability to halve its operating deficit. Forecasts $4 million second-half loss. Announces development agreement with US company Serologicals to apply Gradiflow to plasma protein purification.
• April 2: Lieb resigns as CEO, agreeing to stay on until his replacement is found.
• May 15: Revises anticipated annual loss from $12 million to $15.5-16 million.
• May 29: Trading halted as John Manusu seeks to oust his four board colleagues.
• July 24: Gradipore signals intention to chase chiral separation market.
• August 26: Former Sirtex Medical CEO Dr Colin Sutton joins Gradipore board as a non-executive director.