Mixed results for Vita Life Sciences

Biopharmaceutical manufacturer and distributor Vita Life Sciences (ASX:VLS) posted a full-year revenue drop today because of a reduced sales forecast in its key Asian markets.

The Melbourne company, which operates through Vita Medical and Vita Health, revealed an after-tax profit for 2001 of $830,000, compared with $5.25 million the previous year.

But the result did include a significant increase in contributions from its Vita Medical business, which delivered its parent a 322 per cent increase in earnings before interest and tax of $3.8 million, against $900,000 the year before.

Vita Medical operates in the nuclear medicine field, specialising in lung diagnostics and cardiac stress testing, while Vita Health develops, manufactures and distributes traditional and alternative medicines, dietary supplements and health foods.

The company declined to be quoted for this article, but in a statement to the Australian Stock Exchange said Vita Health had posted strong sales growth despite "a weak outlook for the principal Asian markets", which had necessitated a "more conservative accounting policy"

The company said a one-time write down of $9.8 million was required after one of its largest distributors in Asia projected fewer orders for 2002 as a result of reduced sales.

"This has left the distributor with excess stocks on hand, which it will work through in the coming months," the statement said.

"For reasons of consistency and prudent reporting the directors have determined it was appropriate to treat the distributors' overstocking of otherwise purchased goods by the distributor on a pro forma sale basis."

The result was a drop in pre-tax profit for Vita Health division of $5.3 million for the year ended 31 December 2001.

The company said its overall revenue for 2001 of $48.8 million, 29 per cent less than in the previous year, was materially affected by the write-off, making the adjusted result $39 million.

Despite the disappointing result, Vita Life Sciences announced phase III clinical trials were set to begin in four Australian hospitals for tests of its Technegas generators for patients with breathing difficulties.

It said it was on track to receive FDA approval soon for sale of the generators in the United States, with results from the phase III to be used in its New Drug Application. The company also said it was in advanced negotiations with an overseas investor for continued R&D of its diagnostic equipment.