The company announced its intention to buy the edible film business of Aquafilm for $11 million (€8.9m), on the same day as it signed a new agreement for one version of its XGEL coating system with a US pharmaceutical major.
Based in Tampa, Florida, USA, Aquafilm was founded in 2000 and has a film production facility with US Food and Drug Administration (FDA) certification to produce soluble films for use in nutritional products and food products. The procedures and systems are in place to enable the facility to be quickly upgraded to full pharmaceutical production standard (cGMP).
Under the terms of the acquisition, BioProgress will pay $3.5 million at closing and payments made to match Aquafilm's net annual earnings, on a dollar for dollar basis, to a maximum of $7.5 million. The UK said it would also be investing up to an additional $3 million during 2004 to bring the plant up to pharmaceutical standard and refurbish the offices and packing facilities.
Boost for 'oral strip' ambitions?
In addition to the additional production capacity, Aquafilm has been developing fast dissolving 'in the mouth' films for retail consumer products.
This is a recently forged and growing market which has seen breath freshening product introductions from Warner Lambert and Wrigley's in the USA and Europe, and Boots in the UK. In addition to breath freshening strips, Aquafilm has already developed dissolve 'in the mouth' vitamin strips, according to BioProgress.
Products based on the technology are already reaching the market, with a Spiderman brand of vitamin strips due to roll out in the US and UK to coincide with the launch of the second Spiderman film in May.
The UK firm recently filed patents on a technology to allow a more effective delivery of active ingredients - including pharmaceutical drugs - into oral dissolving films. BioProgress believes this WAFERTAB technology will combine well with Aquafilm's product offering.
In addition to its film production expertise, Aquafilm also operates a conversion and packing capability in Tampa, and can supply finished products ready for shipping.
Aquafilm is forecasting revenues of around $50 million in the period 2004 -2006 from 'in the mouth' dissolving consumer products supplied to a number of companies and BioProgress' $7.5 million earn out is expected to be achieved during this period.
Graham Hind, the chief executive of the UK company, said that the acquisition will enable it to commence XGEL film supplies to customers almost immediately, shortening the timeframe to increasing its capacity to cope with the demands on production as the company moves from the development to commercialisation phase.
The company is constructing a facility for first phase film production in Europe at a site in Cambridgeshire, and said this investment would continue "as our customers expect the security of two site supply." BioProgress decided to operate its own production for XGEL last year once it emerged that its suppliers were unable to meet the standards required for a pharmaceutical-grade film.
To finance the acquisition of Aquafilm's assets and provide additional cash for capital investments, BioProgress has raised £10.5 million via a placing with institutional and other investors.
The company has just reported a pretax loss of £1.67 million for the period from 22 May 2003 to 31 December 2003, on turnover of just under £1 million.
Meanwhile, today's new agreement with an unnamed US company, for BioProgress' TABWRAP technology, used for products in the over-the-counter (OTC) and dietary supplement markets, will spark a payment of $900,000 upon the first commercialisation and a royalty based on the licensee's sales.
The technology will initially be applied to a limited number of products which could be on sale before the end of 2005, according to BioProgress. The products could generate royalty income of between $1 million and $1.5 million per year, said the UK firm.