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BLIS Technologies Ltd remains on track

For Immediate Release

8 November 2007

BLIS Technologies Ltd remains on track and optimistic

BLIS Technologies Ltd (NZX: BLT), developers and manufacturers of advanced oral probiotics announced today that the company had presented two resolutions to a special meeting of shareholders, which were voted on and passed. The resolutions included 1) a proposal to conduct a renounceable rights issue for up to 44,801,079 new ordinary shares. This issue will be provided to holders of existing ordinary shares, on a pro-rata basis at a rate of 2 additional shares for every 5 existing shares, at an issue price of 7.5 cents, and 2) to provide authorisation to the Board to allocate up to 19.99% of the ordinary shares to one or more strategic cornerstone shareholders subject to the provisions of the Listing Rules. In addition to passing these resolutions, the Company also indicated it was pleased with the progress being made and remains on track with the commercial developments that it announced at its Annual General Meeting on 1Aug 2007. The Company also reaffirmed the expectation that it will achieve the financial targets, which it had forecast through to the end of the fiscal year.

The Company remains firmly committed to its retail brand strategy in New Zealand, while at the same time it has been quickly developing its global branded ingredient strategy, which was described at the AGM. “We have been seeking commercial partnerships with companies that have one of the top three brands in their respective markets.” According to CEO, Dr Barry Richardson, “So far the strategy has been working for us. We have progressed our commercial relationship with Nestle Nutrition throughout this year in the infant formula market and are well advanced with at least two other leading global brand manufacturers in very distinct and unrelated industries”.

“The response from the market to date is that our commercial partners seem particularly interested in the technology we have to offer,” Richardson stated. “There is a growing body of international evidence suggesting a link between poor oral health and the increased risk of other diseases such as cardiovascular disease. Since BLIS’s technology platform is about the maintenance of oral, throat and upper respiratory tract health, this is a reason why we could expect a reasonable proportion of revenue from research contracts in the coming year”.

In response as to why it has taken BLIS Technologies Ltd time to gain traction in the international market, Richardson said, “Of course we would always like to move faster, but our potential partners are very large and they typically spend several million dollars on product development and testing prior to commercial rollout. By comparison, New Zealand has been a relatively easy market to build a base of sales, but because of regulatory differences in all our major markets, it is not a model that can be easily replicated off-shore” Richardson said. “This process has constrained the speed at which we have been able to turn BLIS Technologies Ltd around, but I am happy to report that:
a) Through a strong commercial partnership, we anticipate the test marketing of BLIS K12 lozenges in China before the end of the fiscal year, while concurrently completing regulatory approval.
b) We expect to launch in the Irish market in 2008 through a major distributor and it is anticipated that sales could later extend to other European countries. A major advantage to us of this relationship is that having regulatory approval for our products firstly in Germany and now in Ireland, is that we might anticipate easier access to the broader EU market.
c) We have spent a great deal of effort in the Japanese, Korean and Taiwanese markets seeking appropriate business partnerships. The company has been engaged in recent early stage discussions with a Korean pharmaceutical company and is optimistic that if negotiations are successful, it might anticipate early market sales in Korea. The speed of Korean market sales is also subject to the completion of regulatory approvals.
d) With international growth we need to provide logistical support in-market and technical assistance for our key multinational customers. This is a major component of our potential relationship with the Dutch ingredient supply company, DSM Nutritionals. DSM and BLIS are now negotiating a Marketing agreement, instead of the R&D contract proposed earlier, targeting sales in 2008. DSM is expected to initially focus on nutrition and food-based opportunities. Further, it is anticipated that DSM and BLIS Technologies will later undertake a research contract to expand into other product applications.

Richardson was asked why the company was not pursuing the same retail product strategy internationally, as the company had done in New Zealand. He replied, “we have undertaken a detailed investigation of the US market and concluded that while the company could scale up its production to meet demand, the magnitude of the marketing and distribution cost was simply beyond its resources. Being New Zealand-made didn’t help us either, as our products are considered “technical” in nature and our suppliers and retailers would have needed immediate and ongoing support and servicing, which would be challenging, without incurring the significant cost of setting up offices in the US.”

“The logical approach for us was to partner with a company with specialist marketing and distribution that would facilitate access to the top brands within the categories of interest to us.” Dr Barry Richardson said “We are working to have our products approved in the US Food and Drug Administration, as a food ingredient, which further expands our reach and gives us access to the global food market and not keep us restricted to operating in the dietary supplement market.”

BLIS Technologies Ltd plans on using shareholder funds from the rights issue to expand its development capabilities, complete FDA regulatory approval as a food ingredient in the United States, and commercialise the next generation of new BLIS probiotics.


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