GroPep debt-free by the end of 2002, company chairman says

Adelaide-based biotech company GroPep pre-empted the complaints of its shareholders at its annual general meeting yesterday, with chairman Richard England noting at the beginning of his speech that the year was the worst in the company's history.

With a loss of $6.9 million, GroPep shares have dropped a massive 80 per cent since the beginning of the year, when the share price was $2.35. The share price closed yesterday at 47 cents.

England noted that the company had dealt with a number of difficult issues over the course of the year, including an unsuccessful clinical trial, the $13 million acquisition and subsequent disposal of Biotech Australia and the removal of former managing director John Ballard.

On top of this, the company was forced to downgrade its profits from an expected $1.9 million profit to an expected loss of $4 million.

In response, the company has significantly cut its drug development expenditure to a net $2.5 million per year for biopharmaceutical product development and closed the Biotech Australia business, selling off the majority of its assets. GroPep has also refocused on generating positive cash flow, with an eye to returning to profitability by the end of 2003, England said.

R&D review

All of GroPep's R&D projects were currently under review, according to England.

"Expenditure on development will only be made where that expenditure is towards resolving a significant unmet medical need, subject to independent verification of market size and potential and an independent review of the science and our capacity to undertake the work required," England told the shareholders.

New CEO Richard Finder said that the company would focus on its core cell growth factor business, with an eye to optimising the production process. The biotech reagents division would also be examined to evaluate its long term potential.

"We will exploit areas where the company is doing well and improve areas where performance is less than optimal," Finder said.

GroPep has almost finished winding up its sell-off of the Roseville contract manufacturing plant, acquired earlier this year when the company bought Biotech Australia for $11 million in cash and a $6.5 million debt on the remaining mortgage on the site.

The sale of the plant and equipment by tender and by public auction over two days last week, netted the company more than $1.3 million in cash after expenses and GST. CFO Grant Rumball said that there was still some business activities related to the Biotech Australia purchase, but they would be handled from Adelaide.

In addition the Roseville site was recently sold to property developers Macquarie Real Estate Equity Fund No. 1 and a Denham Constructions investment company for $10.1 million in a deal that will eliminate the $6.5 million loan and mortgage debt by the end of the year, with a final payment in October 2003.

As a result, GroPep will be debt-free by the end of this year, allowing the company to focus on generating cash flow and revenues.

England said that the company expects to have $4.5 million cash and $5 million in receivables, by the end of the half year.