Life Therapeutics aims for profit by 2006

Life Therapeutics -- formerly known as Gradipore (ASX:GDP) -- today capped off its 200-day turnaround plan with a set of profit projections that culminated in a forecast overall profit for the company in 2006 of AUD$4.5 million.

Gazing even further into the future, the company also forecast total sales in 2007 of $69 million, and a profit of $13 million.

"We're projecting a loss of around $10 million this year," said managing director Hari Nair. "I expect that we would make a loss of about $2 million in 2005, but by 2006 we should be well in the black."

Nair was appointed managing director in October last year, following a stoush in which almost the entire board of directors was replaced. Since the management change, Nair said, the company cut its losses by 27 per cent.

Its January acquisition of Atlanta-based plasma therapeutics business Serologicals Corporation, for $6.42 million, was aimed at providing financial stability while the company pursued its therapeutic ambitions. The business is earnings-positive, with annual sales of US$28 million last year. Today's announcement forecast that the acquisition would boost Gradipore's profits by $2 million this year, rising to $4 million in 2005 and $7 million in 2007.

Nair said that would be achieved by attracting back customers, and by expanding into the Asian market. Already, the Life Sera division's customer numbers had been boosted from five to 13, he said.

Nair also has ambitions for the Life Diagnostics business -- an amalgam of the Serologicals biodiagnostic products business and Gradipore's diagnostics business. He said the company would aim to develop new, more sensitive, biodiagnostic kits, possibly for HIV and prion diagnostics.

"At the moment, they will collectively do $4 million [in sales]," Nair said. "We are looking at at least $6 million worth of sales [by 2005]."

The gels division -- long a company mainstay and lately its problem child -- is forecast to be profitable by 2006. Achieving that goal would require a successful turnaround of the manufacturing processes to eliminate the variance problems which have plagued the company.

"We will definitely be looking at new distribution agreements and increasing the product line for our current agreements," Nair said. "At the moment the gels are SDS Page gels, so the potential is there to diversify into other areas, including the 2D gels area."

Nair said the company had distributors in place for its BF400 bioseparation instrument in Taiwan, Japan, Korea, India and Australia. "In 2005 I don't expect any profit, but don't expect major losses either," he said. "When we made this forecast we were not looking at any sales of the large-scale instrument GF100."

The Gradiflow technology -- which uses electrophoresis capable of isolating molecules with high purity and yield -- is 'progressing very well' according to Nair. "The machine itself is now validated for production inclusion," he said. "We are looking at possible joint venture agreement for drug candidates that we can produce using the Gradiflow technology."

The BF400 -- the instrument which applies this technology -- was initially launched early in 2003 to target the monoclonal antibodies market, but a poor reception by the target market meant that the company decided to refocus their efforts on proteomics applications. Sydney-based proteomics research firm Minomic is also marketing the instrument.

The targets set by Life Therapeutics assume that selling, general and administrative expenses will remain constant at $6 million per year.

In a presentation to Deutsche Bank in February the company set itself the goal of achieving a $500 million market capitalisation, with an annual $50 million in profit within 5 years.

The market reacted sceptically to today's forecasts. At time of writing shares in Life Therapeutics were trading down 5 per cent at $0.70.