Forbes Medi-Tech Inc. (FMTI) to Cut Staff, Close Plant in Restructuring
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--May 15, 2008 -- Forbes Medi-Tech Inc. (Toronto:FMI.TO - News)(NasdaqCM:FMTI - News) ("Forbes" or "Company") today announced a plan to focus exclusively on its revenue-generating nutraceutical business, which includes functional foods and dietary supplements, and cease all in-house drug development activities. The restructuring plan involves staff reductions across various departments within the Company's current active workforce. The Company is retaining key personnel required in order to achieve immediate and longer term goals.
"We realize the need to realign our business to focus on areas that are generating immediate revenue. The head count and expense reductions that we're announcing today, while difficult, allow us to focus on further developing our nutraceutical business," said Charles Butt, President and CEO of Forbes Medi-Tech Inc.
It is anticipated that the Company will reduce its 2008 operating and research and development expenses by approximately $2.7 million. The Company forecasts an extension of its working capital into the fourth quarter of 2009 based on a number of factors including: the successful implementation of these cost reductions; a projected 20% increase in 2009 revenues; anticipated sales of excess inventories; and the receipt of the recently-announced $3 million in non-dilutive capital funding and the additional $800,000 funding within the next year.
"Moving forward, this strategic focus on the nutraceutical sector represents a truly pivotal point in Forbes' development. The estimated global market for functional foods has reached more than US$30 billion, and consumer trends point to an increasingly active population that values the pursuit of healthier lifestyles. Building on these positive dynamics, Forbes will continue to target exciting commercial opportunities in the functional foods and dietary supplement markets in the U.S., Europe, and the rest of the world," said Mr. Butt.
Key components of the business restructuring plan:
- Forbes will focus on the revenue-generating nutraceutical business area, with a mandate to grow Reducol(TM) and the phytosterol product portfolio while improving profitability and further reducing costs.
- To build the strong nutraceutical business base, the Company will retain core team members and endeavor to target key merger and/or acquisition opportunities.
- The Company has decided that all pharmaceutical development activities will cease based on the early stage of these technologies and the associated development times leading up to drug approvals.
- The Company plans to close its drug development facility in San Diego, California and reduce its current total workforce by approximately one-third, affecting employees in the U.S. and Canada.
- Forbes will continue to seek favourable business development opportunities for its pharmaceutical business unit, including out-sourcing and licensing agreements. The Company retains the ownership and rights to drug compounds and technologies within its intellectual property portfolio.
The Company's financial outlook for 2008 revenues continues to project sales of $9.75 million to $10.5 million, an increase of up to 18% compared to its reported revenues in 2007. For further discussion of our 2008 revenue guidance, please refer to the Company's press release issued on February 7, 2008.
An increasingly active population, the pursuit of healthier lifestyles and the desire to live longer has given rise to a category of products known as nutraceuticals. This category includes functional foods, which are conventional foods containing ingredients that provide additional health or nutritional benefits leading to possible risk reduction of contracting chronic diseases. The estimated global market for functional foods has reached more than US$30 billion. The US market alone contributes $15 billion annually to this, and the Nutrition Business Journal estimates it will grow to $34 billion by 2010. The nutraceuticals category also includes dietary supplements, which are healthful products derived from natural and synthetic food sources and delivered in a medicinal form. Dietary supplements accounted for approximately 34% of the $47.6 billion US nutrition market, according to a Health Business Partners study that was published in 2000.
A corporate update will be provided during a conference call on Thursday, May 15 at 1:30 pm PT (4:30 pm ET). To participate, please dial 877-323-2010 or (direct) 416-695-9701. Alternatively, a live webcast also can be accessed through the Company's website at www.forbesmedi.com. The conference call will be available for replay until May 22, 2008 by calling 800-408-3053 or (direct) 416-695-5800 (Passcode: 3261319#).
For more information about Forbes Medi-Tech, please visit www.forbesmedi.com.
The revenue guidance provided above is primarily based on the contracted and forecasted tonnage of Reducol(TM) and other value added products for sale into the functional food and dietary supplement markets. We have consistently issued revenue guidance in the past in an effort to provide our shareholders with an updated revenue outlook in a timely manner. We caution readers that our revenue guidance is not to be relied upon for any other purpose. The 2008 revenue guidance includes assumptions that the contracted and forecasted amounts will be ordered and shipped as anticipated.
This News Release contains forward-looking statements and forward-looking information, within the meaning of applicable securities laws (collectively, "forward-looking statements"), concerning anticipated developments in the Company's business including projected sales, revenues, and sufficiency of working capital; the Company's planned downsizing, business focus, potential commercial opportunities, and future growth; future business opportunities for its pharmaceutical business unit; and other information in future periods. Forward-looking statements can be identified by forward-looking terminology such as "plan", "to focus", "improving", "designed to", "will", "goals", "further developing", "2009", "target", "opportunities", "to grow", "continue to seek", "financial outlook", "forecasts", "projected", "anticipated", "possible", "estimates", and similar expressions or variations thereon. Forward-looking statements are inherently uncertain, and actual results may differ materially from the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, the Company's need for additional future capital, which may not be available in a timely manner or at all; the Company's reliance on a few existing customers for performance and its need for additional customers; uncertainty whether the Company will realize the forecasted sales revenues; the effect of competition; uncertainty regarding market acceptance of the Company's products or those of its customers; unanticipated expenses and inability to control certain costs; intellectual property risks including the risk that our patents may be challenged or allegations may be made that we are infringing the patent rights of a third party; the need for regulatory approvals, which are not assured; product liability and insurance risks; manufacturing risks and the Company's dependency on Phyto-Source LP, for its manufacture and supply of Reducol(TM); exchange rate fluctuations; changes in the Company's business strategy or plans; uncertainty whether any merger or acquisition opportunities will be realized; the volatility of our share price and trading volumes; and uncertainty whether our shares will continue to trade on NASDAQ. For a further discussion of these and other known risks and uncertainties affecting the Company and its business, please see our latest Annual Information Form/Form 20-F, and other documents filed by us with Canadian and U.S. securities regulatory authorities at www.sedar.com and www.sec.gov. Forward-looking statements are based on the beliefs, assumptions, and expectations of the Company's management at the time they are made, and the Company does not assume any obligation, except as required by law, to update its forward-looking statements if those beliefs, assumptions, or expectations or other circumstances should change.
Reducol(TM) is a trademark of Forbes Medi-Tech Inc.