GroPep to profit from JRH sale

Adelaide biotech company GroPep (ASX: GRO) will profit substantially from the sale of JRH Biosciences to Sigma-Aldrich -- the company has negotiated for the transfer of its marketing, sales and distribution agreement with CSL to JRH, through the life of the agreement, which expires in 2010.

But in addition to the revenues from the sales of GroPep's cell culture products, CSL will pay GroPep AUD$1 million per year for the remaining six years of the agreement. The first half-yearly payment will be paid at the end of the current financial year.

The extra funds, plus money coming to the company from an R&D start grant awarded late last year for the development of an anti-psoriasis drug, will boost GroPep's net profits after tax for the 2004-2005 financial year to $AUD3 million.

"It enhances our earnings quite substantially," said GroPep CFO Tony Mitchell.

He said the additional revenues would be very useful as the company moved to expand its R&D programs into the clinic.

GroPep's CEO Bob Finder welcomed the new arrangement with JRH and Sigma-Aldrich.

"We expect the combination of JRH and Sigma-Aldrich to produce an organisation with considerable strength in the Cell Culture Media market and presents even greater opportunities for GroPep to develop its Cell Culture Products business," he said.

Shareholders responded positively to the news, with an increase in the share price. At the time of writing, GroPep shares were trading at AUD$1.15, up 15 per cent on yesterday's closing price.