Deal with US firm rewarding, Comvita says

FIONA ROTHERHAM
Last updated 18:22 25/07/2013

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A licensing deal between natural health and beauty products company Comvita and Nasdaq-listed Derma Sciences has been lucrative for both parties, Comvita said today.

Comvita acquired a 5 per cent stake in the American company after licensing deals in early 2006 and 2009. They gave Derma exclusive worldwide rights to manufacture and sell its range of Medihoney woundcare and skincare products to the professional and medical markets.

Comvita retained the worldwide rights to sell the same products manufactured by Derma in the over the counter market.

The licensing rights agreement had proved "outstandingly rewarding" for both parties, Comvita chairman Neil Craig told the annual meeting today.

Derma's Medihoney sales are now US$15 million ($19 million) a year from which Comvita receives a royalty stream of about $1.2m a year. Comvita has also received its second capital milestone payment of US$1m based on Medihoney sales reaching the targets agreed in the licensing deal. 

Derma has said its sales of the product range are growing about 40 per cent a year, in line with rapid growth in the overall advanced wound care market.

Despite gains in that part of the business, Comvita reported a reduced net profit after tax of $7.4m in May, down from $8.2m the previous year, for the financial year ending March 31.

Profits were affected by constrained honey supply and costs for honey rising 50 per cent year on year. Revenue rose to $103.5m, up $74m on 2012.

Chief executive Brett Hewlett told shareholders that the acquisition of a Whanganui-based apiary business had lifted its share of the honey source it owned to 30 per cent.

One of the company's key focuses this financial year is continuing to shore up the honey supply chain it relies on, including increasing apiary ownership.

A quarter of all Comvita sales are now made direct to consumers via retail and internet.

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- BusinessDay.co.nz

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