BIOPROGRESS and its Major Shareholders

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Interview with Richard Trevillion, CEO of BioProgress - 30th November, 2006

By Vernon Gurtner

Lemming Investor managed to get a few minutes of Richard Trevillion’s time between meetings to gain an insight into how the BioProgress’ transformation into a combined Drug Delivery System company and pharmaceutical company is progressing.

Over the last eighteen months BioProgress has been transformed in many different ways. Richard Trevillion took over as CEO on 23 May 2005. Since then the management and executive team has been fundamentally changed. In come people like Steve Martin, who is making an enormous contribution to the company as Commercial Development Director, and Dr James Murray (co-founder of Shire Pharmaceuticals). The company has also recruited a significant number of key personnel within the business and has added an Advisory Board - all solid changes.

The company has, however, not just recruited key staff. The business strategy has also been transformed. In the early days BioProgress promised a lot and the raw potential of BioProgress’ technology captured the stock market. Lemming Investor has already reported on the company’s history and sufficient to say that in the early days the business was focused on machines and machine sales rather than the products that the technology could enable.

BioProgress has a diverse and novel range of drug delivery technologies and is now pursuing a far more traditional and potentially far more lucrative Drug Delivery System commercialisation strategy, focused on products and adding value. It is pursuing the strategy with vigour and at a pace that would leave many breathless. The real value of a drug delivery technology is in the products that it can enable and Richard and the team at BioProgress are now focused on products and the value that can be generated within the business.

Richard commented that at the recent CPHi trade show it was noticeable that stands which tried to show the workings of the machines that produce companies’ drugs had very few visitors – BioProgress’ stand, on the other hand, concentrated on the end-products, BioProgress’ own products and meeting the needs of patients. Richard says that BioProgress stand was swamped with visitors and enquiries.

Richard admits that 18 months ago the company had made little real progress either with the commercialisation of its technologies or product development. Also, the company had capabilities and expertise that were not being exploited or properly focused. The launch of two new technologies, Entwrap and SoluPol, are examples of where the company has, in the last eighteen months, identified clear capabilities within the company, identified clear markets and delivered new technologies. There are now active product developments taking place with those technologies; a substantial achievement in itself but this has been achieved by BioProgress in amazingly short timescales. It has also been achieved in parallel with rapidly commercialising other technologies, such as Tabwrap, which also has a significant number of product developments underway.

The oral Drug Delivery System (DDS) market is expected to grow 7-9% per annum, from $89 billion in 2005 to over $135 billion in 2010 (From Datamonitor and other sources). Richard believes that BioProgress has the potential to benefit from not only the annual growth rate within the market but also the dynamics that are generated within a growth market.

BioProgress also has a number of other benefits up its sleeve. Some drug delivery technologies require significant reformulation of drugs or products. In the pharmaceutical market this often then involves lengthy clinic trials and approvals. BioProgress’ has a broad range of technologies. They can enable some completely new products and those are likely to involve lengthy trial and approval processes. However, the base ingredient in BioProgress’ technologies is XGel™ which is a GRAS (Generally Regarded As Safe) material which is used to wrap, coat, encapsulate or carry the drug. The nature of the technologies together with XGel being GRAS means that many products can be developed and approved very quickly. For example, using Tabwrap on a known pharmaceutical product can be achieved very quickly with little approval work, particularly where the drug is within the US Monograph process [Editor - the FDA produces a number of monograph lists of specific drugs and dosage forms that can be imported into the US without further or with minimal approval requirements. See links - and ]. Richard is keen to emphasise that all of BioProgress’ technologies can enable rapid product development, often with fairly straightforward 'bio-equivalence' and stability trials. This can all be achieved in a matter of months rather than years.

BioProgress has not only adopted a Drug Delivery System commercialisation strategy but has also created its own pharmaceutical division, mainly through acquisition. In the last eighteen months 3 acquisitions (Dexo in France, Segix in Italy and assets from AirPharma in the USA) have created a multinational pharmaceutical division with distribution channels in Europe and the USA. The company has also reported (in the FAQ section of its website: ) that it is in late stage discussions over 25 additional distributors. During our interview Richard confirmed that these distributors are not necessarily in unique countries or regions; rather many are specialist in specific market sectors/drugs and thus we must assume that some of the distributors overlap in terms of the territories that they serve. Obviously from a Lemming Investor perspective, the prize must be distributors (and therefore product available) in the UK, Japan and Germany.

BioProgress’ Dexo pharmaceutical division provides the company with considerable strength. It not only provides a growth core business with revenues but also provides BioProgress with a channel to market for its own products, using its platform Drug Delivery Systems. Coupled with the ability to quickly develop and launch products using those delivery technologies gives BioProgress real strength. It gives BioProgress the ability and option to go it alone with products. This in turn creates a market pressure or pull that attracts partners in and demonstrates the technology in action.

BioProgress is working with a large number of partners on products using a range of its platform technologies. Everything is shrouded in secrecy and non-disclosure agreements but that is normal for this market. It is thus really a miracle that the FAQ section of the company’s website is as comprehensive and as informative as it is. The company has adopted a communicative stance in an endeavour to inform shareholders of the progress being achieved. In terms of BioProgress’ strategy of partnering it is achieving this in a number of ways. Many pharmaceutical companies have problem drugs. These include friable or fragile tablets, which represent a range of problems for pharmaceutical companies. However, problem drugs are not limited to friable tablets and BioProgress’ technologies can overcome a range of traditional problems and the technologies can be used to add value in other ways (for example, different dosage formats, aesthetics, enteric coating, etc.). Thus BioProgress is working with partners to enhance and add value to existing drugs. These developments can, in pharmaceutical terms, be low risk and rapid. In addition, Bioprogress can offer Brand reinvigoration to pharmaceutical partners by offering existing products in new oral dosage forms. In general, BioProgress will receive milestone payments and a royalty with the product being marketed by the partner.

However, as BioProgress states in the website FAQs it is possible that BioProgress can secure marketing rights in some territories even where the original drug belongs to the partner.

BioProgress also has the capability to develop products itself (or co-develop) and this creates a further range of partnering options. Richard is keen to stress that BioProgress is not in the business of developing drugs but in the business of developing products. Thus, for example, BioProgress could take known generic molecules and develop new products from them using its platform technologies. An example of BioProgress’ own product development is the smoking cessation melt-in-the-mouth strip, which are currently under development. This type of product can be licensed out to partners but the rapid relatively straightforward development, facilitated by BioProgress’ technologies, enables BioProgress to take such products to an advanced stage of development before licensing them, thereby giving a strong position in license negotiations.

Richard is reluctant to go into the products that BioProgress could develop but the company’s website refers to the capability to orally deliver proteins and peptides. These drugs include insulin, beta-interferon and erythropoietin. The recent RNS about NRobe refers to its capability to deliver large molecule drugs and combination drugs. While NRobe is licensed to FMC the RNS does raise the prospect of BioProgress developing its own products using NRobe for Dexo to market. Also, the recently announced SoluPol technology is an exciting new delivery format that appears to have substantial potential. Referring to the RNS announcing SoluPol Richard is keen to emphasise that product development is already underway with the SoluPol technology and there is strong interest from major pharmaceutical companies.

Thus BioProgress is not a company that is starved of development potential or ideas. The problem is probably prioritising them, something that Richard is not surprisingly tight-lipped about. The information being released by BioProgress points towards an active product development programme that is focused on delivering revenues and added value; particularly in markets with large unmet needs. The capabilities of BioProgress’ suite of platform technologies means that the range of product development opportunities is diverse from simply applying Tabwrap to an existing known pharmaceutical to innovative new forms of drugs or even completely new products. However, BioProgress is a Drug Delivery System company and is therefore not in the business of developing new molecules or drugs but is about developing new forms of existing drugs and new products. Drug development is often high-risk and has long timescales. Being a Drug Delivery Systems company means that BioProgress it applying working technologies to known compounds. It may do so to produce novel and new products; and this creates exciting opportunities with reasonable levels of risk but with the potential of large rewards.

Where BioProgress develops products it can use the Dexo brand to market them or it can seek partners. Richard says that this will be considered on a case-by-case basis. Clearly there will be some products that are best partnered.

The company’s focus has moved completely away from machine sales to being product focused. With the Dexo brand and infrastructure BioProgress has recreated itself as a fairly unique combination of pharmaceutical company and drug delivery system company.

At present, the market is eagerly anticipating news about the commercialisation of Tabwrap and the restructuring of the FMC agreement for NRobe. We therefore could not pass up the opportunity to ask for comment about these two big potential news items. However, Richard declined to comment. Richard did, however, say that, as several news releases have said, 2007 will see BioProgress converting a number of developments and products into revenue streams.

We also asked about Ronflux, that was launched mid-year, and the apparent lack of shelf-visibility in France. Richard was reassuring that it is there and is selling and there are re-orders. BioProgress has been cautious on the basis that it is all too easy to throw dollars at each product that is launched. Richard relies on a targeted approach measured to fit in with the profile of the product, its promoters and the receiving public. So the chance of a big splash promotion involving David Gest’s snoring on Jungle Celebrity is a definite no-no because the orders generated would not be justified by the expense. Ronflux is on the shelves and is being rolled out nationally within France. However, BioProgress is matching the expenditure with the returns.

Finally, we asked Richard about his recipe for success at BioProgress. Clearly, he leads by example and his passion for BioProgress and its systems is infectious. He has attracted a great team around him - people with great skills in science, engineering, negotiation and marketing - who meet together and discuss objectives on a very regular basis. Richard is clear that BioProgress always had great technology and intellectual property. It now also has a team focused on generating real value from them.