There's (still) a buzz about Bioprogress

It was with more than the usual level of anticipation that I met with Richard Trevillion, chief executive of Bioprogress (BPRG), a week last Friday. The company is alternately a darling and a demon of private investor bulletin boards. Also Bioprogress and I have a history, and you do not always get a chance to look back and see what went wrong.

New technology

 
Bioprogress owns a film technology that promises to revolutionise the way medicines and food supplements are manufactured and consumed. Its film encapsulates drugs and supplements, such as vitamins, or allows them to be impregnated into film that dissolves in the mouth. Unlike the predominant gelatine based film, Bioprogress says its cellulose film contains no animal products and could bring down the cost of manufacturing drugs and supplements. It can also precisely control the release of the drugs, and make them easier to swallow, and easier for drug companies to brand. You only have to consider the number of pills and potions we suck, swallow and chew to see the potential.
 
When I interviewed Mr Trevillion's predecessor in December 2004, the company was on the cusp of commercialisation. It had negotiated a number of deals including one licensing its technology to FMC Biopolymer, said to be worth a minimum of $160 million in revenues in the first six years of commercialisation. But investors have heard little about this since then. Bioprogress has renegotiated some partnerships, although it will not say which. Right now it is renegotiating the rest. But the company says it is bound to silence by confidentiality agreements and the lack of any details means the partnerships appear moribund to outsiders. The cusp, it seems, is more akin to a hard slog.

Different direction

 
Then, while the rest of us were celebrating Christmas, Bioprogress changed course. It announced it was taking over Dexo, a French drug company and setting up a joint venture with Crescent Pharma, a manufacturer of generic drugs like Ibuprofen. Although already a small-scale film manufacturer, investors were left wondering whether Bioprogress' emergence as a drug producer belies a lack of confidence in its earlier strategy - to license its film without dirtying its hands manufacturing the drugs. It was that strategy, promising spectacular growth at very little cost that had caused the buzz about Bioprogress.
 
"The actual reliance on a pure licensing revenue model is an inherently risky strategy," says Mr Trevillion because so much is out of the licensor's control. The licensee might be acquired or the individual responsible might be promoted or made redundant, "There is nothing you can do about that.
 
"A number of pharma companies and medical device companies will enter partnerships not actually to promote a technology," he says. "They enter partnerships in order to destroy a technology.
 
"The essence behind the deal that we have just consummated was to obviate that risk by applying our own technology to our own products in markets that are non-competing with our partners."

Profitable

 
On the one hand, he says, in acquiring Dexo, which is profitable, Bioprogress has got itself a 'revenue cushion' and business with growth prospects. On the other hand by putting its products into the market through Dexo and its joint venture with Crescent Pharma, Bioprogress will demonstrate the superiority of its film and create demand for better pills and in-the-mouth strips. Far from conflicting with the licensing model it gives "extra impetus" to it, he says because customers will ask for it.
 
But even the enlarged Bioprogress is a small player and for the time being its revenues will be dwarfed by those anticipated from its partnerships. Dexo is expected to bring in 6.5m euros this year. While investors remain in the dark, buying shares in Bioprogress will surely be a speculative affair. In such a rarefied atmosphere investors have little to go on but their assessment of management. Mr Trevillion cuts a credible figure. No less enthusiastic about the product than his predecessor, he appears to be embarking on a more robust strategy to bring it to market. "Just signing a partnership deed itself, although people think it is wonderful, means nothing," he says. "You have created the ability to generate value. People create value not bits of paper."