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Comvita completes global licensing deal with Derma Sciences

Wednesday 24th February 2010

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Comvita, the medicinal honey products developer whose shares have doubled in 12 months, said it completed a global licensing and manufacturing deal with Nasdaq-listed Derma Science Inc. for its Medihoney wound-care line.

Shares of Comvita climbed 1.2% to $1.76 and have soared 98% in the past year. Derma stock was last quoted at US$5.20 and has slipped 17% in the past month. Under the agreement, Derma gets exclusive worldwide rights to manufacture and sell the Medihoney range, which uses `medical grade’ manuka honey, to the professional and medical market.

Comvita retains the rights to sell the same products to the over-the-counter market, under an arrangement where it supplies the honey and Derma makes the products. Derma will pay US$4.25 million, made up of US$2.25 million cash and US$2 million of stock at US$5 apiece. Comvita also gets 133,333 options exercisable at US$5.50 and a further 100,000 options at US$6.25, giving it about 12% of Derma on a diluted basis.

The deal also provides for additional payments to Comvita provided Derma meets certain sales milestones. Comvita expects such payments to amount to $2 million within three years. It also gets royalty payments on Derma’s sales of Medihoney products, which are expected to amount to $500,000 in 2011, the first year of the arrangement.

“Comvita and Derma Sciences have worked long and hard to get this agreement in place, and we are very happy to have overcome the obstacles created by the global economic downturn,” chief executive Brett Hewlett said. “Derma is the best possible partner for us because of their deep knowledge of the advanced wound care markets.”

Hewlett is to join Derma’s board.

Derma chairman Ed Quilty said the deal will “leverage Comvita’s ample supply of manuka honey” to expand Derma’s Advanced Wound Care product line in coming years.

Derma will expand its global presence as a result and is bolstering its sales force and hiring a managing director for Europe.

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