May 12, 2005

 

Chemeq announces first sales shipments and production update

 

 

Chemeq Limited (ASX: CMQ) today announced that it had completed shipments of its Chemeq® polymeric antimicrobial to customers in South Africa and New Zealand.

 

The shipments are the first since the licensing of the company's commercial manufacturing facility at Rockingham in Western Australia.

 

A small consignment of 640 litres of polymeric antimicrobial was shipped to Chemeq's South African distributor.

In addition, 200 litres of polymeric antimicrobial was sold and shipped to a customer in New Zealand. Chemeq Chairman Dr Graham Melrose said that the first shipments of finished product from the company's manufacturing facility ushered in a new era for Chemeq.

 

"The whole Chemeq team can be very proud that we have now taken our polymeric antimicrobial product from original research and development through to manufacture and commercial sales," he said.

 

"Chemeq has an ambitious strategy for its polymeric antimicrobial, and our immediate priority is to improve capacity at the company's plant and continue the global marketing of our products."

 

As previously disclosed, a filtration issue is currently limiting production at the company's manufacturing facility to between 10% and 25% of nameplate capacity.

 

Notwithstanding the filtration issue, all other parts of the manufacturing plant have operated consistently at 55% of nameplate capacity.

 

In conjunction with its independent engineering consultants, Chemeq has considered a number of possible solutions to the filtration issue. As a result, Chemeq has ordered supplementary equipment which it believes will increase production output.

 

Dr Melrose said that if the supplementary equipment operates as planned, Chemeq expects plant capacity to be at least 55% of nameplate capacity in the near future.

 

"We can then commence final process refinement and commissioning," he said.

 

"However, whilst commissioning continues at the plant, we are still able to produce finished product and continue shipments to customers."

 

The total cost of the installed, supplementary equipment is budgeted at $500,000. No existing plant will be made obsolete as a result of the plant configuration changes.

 

It is expected that the supplementary equipment will be delivered by the end of May. After installation and testing, the company anticipates being in a position to provide an update on plant capacity, during July.

About Chemeq

 

Chemeq is a veterinary drug producer which has developed a unique product, Chemeq® polymeric antimicrobial, for the prevention and control of intestinal bacterial diseases in feedstock animals, pigs and poultry.

 

The company's manufacturing facility at Rockingham in Western Australia is currently undergoing optimisation. The Australian Pesticides & Veterinary Medicines Authority (APVMA) issued a Good Manufacturing Practice (GMP) licence for the plant in April 2005. The nameplate capacity of the plant is 20 tonnes of active pharmaceutical ingredient per annum; equivalent to approximately 400,000 litres of finished product per annum.

 

To date, product approval has been secured in South Africa (pigs and poultry) and New Zealand (pigs). Distribution agreements with leading distributors have been secured in South Africa, New Zealand and Malaysia.

Chemeq's breakthrough AU$1.5 million sales order was signed with a South African group in August 2004.

 

Chemeq's intellectual property is protected by patents registered in more than 80 countries. The most recent approvals were received in U.S.A., and China where Chemeq now has manufacturing and marketing protection through to 2020 in both countries.

 

In March, Chemeq shareholders approved an issue of convertible bonds worth up to AU$60 million with investment groups Mizuho International plc, Stark Trading and Shepherd Investments, which underpins the future financial strength of the Company.