GroPep posts fourth consecutive positive quarter

Adelaide biopharma GroPep (ASX:GRO) today announced its fourth consecutive quarter of positive operating and net cash flow.

Strong customer receipts of $4.2 million -- 86 per cent from product sales -- plus operating cash payments of $2.8 million, swelled the company's cash holdings to $11.2 million at the end of the March quarter.

The figure was reduced by capital expenditure of $0.4 million, half of for an infrastructure upgrade at its Thebarton manufacturing facility, announced yesterday. GroPep will spend $3 million on the upgrade during this and the next two financial years, in the expectation that its current growth spurt will continue.

The company, which expects revenues from its cell-culture products this financial year to increase by 20 to 25 per cent over its 2002-3 result, has already begun work on the upgrade.

GroPep CEO Bob Finder said the project, due to be completed in 2006, was being funded from operating cash flow and existing cash reserves, and would enable the company to meet the expected growth in demand for its cell culture products for at least the next five years.

He said the capital expenditure would also support GroPep's compliance with current good manufacturing practice (GMP), allowing it to meet the regulatory requirements of Australia's Therapeutic Goods Administration (TGA) and the US Food and Drug Administration (FDA) for producing biopharmaceuticals for human clinical trials.

The company's CFO, Mr Tony Mitchell, said the company's two existing manufacturing suites in Thebarton were still sufficient to cope with production of its three FDA-approved products for several years.

Those products include its leading product, an analogue of insulin-like growth factor-1 (IGF-1) used keep cell cultures alive and replicating during biopharmaceutical manufacture. The GroPep product is rapidly gaining market share at the expense of insulin, which in turn supplanted traditional bovine serum as in cell-culture media.

Mitchell said the company, lacking the space to expand outwards, was going upwards. To minimise disrupting production, the roof will be raised progressively, in sections, creating extra space for services -- water and air purification, air conditioning and waste handling.