GroPep boosts half-year profit by 80 pct

Adelaide-based GroPep (ASX:GRO) has increased its profit more than 80 per cent after tax to AUD$1.55 million in the half-year to December 31 2005, compared with $850,000 in the previous corresponding period.

Total revenue for the half-year was $8.7 million, 8 per cent above the previous half-year and driven by 24 per cent revenue growth from the company's biological products division to $7.6 million.

"The first half year was very good, and based on our biological product sales -- and particularly cell culture products -- was what we had on the guidance," said GroPep managing director Bob Finder. "We continue our guidance about the same and should be at $4 million before tax. Revenue growth for the full year is projected to be about 10 per cent driven by growth in revenue from Biological Products of about 20 per cent."

GroPep's biological products division comprises cell culture and biomedical research products. The cell culture products are bioactive factors used by the biopharmaceutical industry to product human therapeutics. They are currently used in the manufacture of eight internationally approved biopharmaceuticals and a further five in mid-to-late stage clinical development, two of which announced positive phase III results during the last six moths. Regulatory approval and market launch of these products is now possible within the next 12-18 months.

Revenue from cell culture Products was $6.9 million, up 22 per cent, while revenue for biomedical research products was $600,000, up 50 per cent over the prior half-year.

Capital expenditure of about $600,000 was incurred, principally relating to the upgrade of the company's Thebarton manufacturing facility. "With the majority of our investment in the facility upgrade now completed, we expect operating and net cash flow to continue to be positive during the second half of 2005/06," said Finder.

Expenditure in the company's biopharmaceutical development program decreased by 4 per cent to $2.4 million. After allowing for R&D related revenue, net expenditure was $1.7 million, compared with $1.1 million in the prior period, following a reduction in revenue from the Malaria Vaccine Initiative project and the AusIndustry R&D Start Grants.

Net expenditure on the biopharmaceutical development program as a percentage of total revenue was 20 per cent within the company's target range of 15-20 per cent.

GroPep has recently begun to recruit for a phase I clinical trial to evaluate the safety and tolerability of vaginally administered PV903 gel, a potential treatment for recurrent miscarriage. Results are expected during the second half of 2006 and if successful, GroPep will seek to partner PV903 with an international pharmaceutical or biotechnology company with an established franchise in reproductive medicine.

GroPep has just commenced a review of its corporate structure. It has engaged Ernst & Young Corporate Finance and will consider the appointment of one or more additional directors with relevant experience.

"Our funding of the R&D does not seem to be adequate and we want to see how we can get more funding for R&D and still get our target for profitability," said Finder.

Gropep has $11.9 million in the bank.