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1 November, 2006 - 15:20 By Staff Reporter

Market logic hard to fathom as US acquisition gets thumbs down

Perhaps the acquisition was not quite as glamorous as the City whispers had indicated; perhaps investors reacted negatively to the slight dilutive effect of a placing; or maybe a measure of profit-taking was in evidence, but it has taken what looks a superb strategic acquisition and a key technology announcement to put paid to the month-long climb in speciality pharma company, BioProgress’ shares.Particularly ironic as BioProgress looks set to get its hands on significant sales and distribution channels in the US market following its agreement to buy American business airPharma.

BioProgress specialises in new ways to coat or encapsulate medicines of various forms.

The Cambridge Science Park based company’s shares stood at a shade over 40p at the beginning of October, steadily rising to a year-high of 66.5p a couple of days before the announcement of its intention to buy a US business and place a number of shares to drive further expansion in the US.

Much of the upward momentum had been fuelled by anticipation of a key acquisition, prompting BioProgress’ board to issue a ‘taster’ statement to the Exchange ahead of a more detailed announcement on October 30.

Receding to 58.25p in the wake of those announcements the company’s share price was still, even then, a comfortable pre-October year high.

Even the unveiling of a key new enabling technology at the end of the month failed to tempt investors back to the company in any real numbers, possibly already content to take bank their gains.

But the fact remains that it has been a particularly good month’s work in what has been a turbulent year for BioProgress, with much attention focussing on the company’s apparent inability to retain a finance director for more than a few weeks.

The FD’s seat at the boardroom table was occupied by a succession of three different faces during a four-month period earlier in the year. The third of those faces, Hiral Patel remains with the company and the company’s assertions that the affair was an unfortunate, but ultimately trivial aberration now look far more credible. The strategic progress the company is making in US will be particularly heartening to the board.

BioProgress will pay £4.2m for the airPharma, half in cash, half in shares. The company said the deal would allow it “to leverage its enabling technologies into own branded products directly within the US market.”

The assets of airPharma comprise 20 brands, ten of which are currently marketed. Sales of the airPharma brands are expected to generate revenues of approximately £2.2m in the year ending 31 December 2006.

BioProgress also lifted the lid on a placing of just over 12 million new shares, representing 8.7 per cent of issued share capital, with new and existing institutional investor.

The oversubscribed placing brought a number of new institutional shareholders to the company.

A statement said that the proceeds from the placing will be used for further product development, further expansion of the company’s US sales and marketing infrastructure and to provide additional working capital.

In all respects with the existing ordinary shares of the company.

“The acquisition of the airPharma brands and the associated distribution, sales, manufacturing and marketing capability is an exciting development for BioProgress’ US business,” said the BioProgress CEO, Richard Trevillion.

“The synergies both in terms of our existing branded products and new line extensions should be capable of significant revenue generation in 2007. We envisage new launch opportunities early in the New Year.”

The flow of good news was further strengthened by the announcement of the launch of a new enabling technology, SoluPol, a novel method for delivering liquid dosage forms.

Liquid medicines can offer an alternative to the traditional solid dosage forms but taste issues have to be overcome. SoluPol, according to BioProgress, has the ability to mask taste, enhance stability, and create novel small volume buccal liquids, which have a muco-adhesive or muco-protective effect within the mouth.

The market for dysphagic patients, those who are unable to swallow, is significant, according to the company. For example, between 15 per cent and 33 per cent of patients in nursing homes in the UK have difficulty swallowing solid dose forms.

Eighty-two per cent of Parkinson’s disease sufferers also have difficulty in swallowing.

BioProgress has already signed up Czech Republic company, Zentiva to develop and license the technology in central Europe and it says negotiations are ongoing with licensing partners in Western Europe and in North America for both prescription and OTC rights to the product.

The company says that marketing and revenue generation of the product is anticipated to commence in 2007/8.

The anticipated global market size, it says, is in excess of $1bn.

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