LISTED Western Australia-based complementary health care company Medec has signed a $24 million supply agreement with Singapore-based Raoki International to supply its energy stimulation product Medec Pulse.
Medec is contracted to supply 50,000 units in 2004 with an additional option for 200,000 units in 2005 and 300,000 units in 2006.
The project is expected to increase Medec revenue to $7 million for 2004 and $18 million for 2005.
The contract specifies that Raoki International has exclusive distribution rights over the Medec Pulse.
Raoki has the right to adjust shipment volumes up and down, if it provides eight weeks notice before a particular delivery is due.
Any large reduction in quantity would result in Raoki ceding exclusive rights.
According to the company’s announcement to the Australian Stock Exchange the supply agreement will help maintain Medec’s profitability that was 12 per cent in its first year.
The first 10,000 units will be manufactured at Medic’s German and Australian facilities and will be delivered by January to Raoki stockists in the US, Europe, Asia and Australia.
The stockists will pay Medec cash on delivery.
Medec Pulse is one of three products the company has developed so far.
It is a small device that inductively stimulates the part of the body needing treatment such as the elbow in cases of tennis elbow.
It retails for US$300.
The main sources of demand are sports involved people as well as practitioners of holistic medicine.
Medec has so far sold 1,000 units, which were manufactured as a trial but has since upgraded the design and is currently negotiating the establishment of large scale production at factories in Malaysia, Hong Kong or China to reduce unit costs.
Indeed, commercialisation of Medec Pulse was one of the major projects defined in the company’s IPO prospectus.
Medec executive chairman Josef Plattner said that since the company was formed in July 2002 its revenue projection had risen from $2 million in the year to June 2003 to more than $18 million in 2005.
"However, the forecasts are based on the commercialisation of only three products with two more under development," he said.
"Two substantial further benefits of this new contract are the boost in the Medec brand profile and cross selling.
Medec had initially planned to list on September 11, however, the float was held off several weeks.
The company finally made its ASX debut on October 10 with a starting price of 50 cents.
That price fell to around 30 cents, however, the latest news pushed it over the 60 cent mark, an 81.25 per cent increase.
In an address to the company’s annual general meeting Mr Plattner said the company had developed its physiotherapy and sports bioresonance system device ahead of schedule and below budget and was negotiating with the Higher Medical Institute at Plovdiv, Bulgaria to carry out the clincial study required for European Medical Products Certification.
The company has also added three Medec centres in the US. It expects to have 50 centres operating around the world by June 30.
Medec has also been listed on Germany’s Berlin/Bremen Stock Exchange.
Medec’s systems work by measuring the electrical resistance registered at the acupuncture points corresponding to the body’s 12 main meridians with its biograph.
If the biograph registers high resistance at any of those points it indicates a potential problem that would be treated by either the bioresonance or pulse systems.
In Medec’s prospectus independent accountant Hayes Knight GTO warns that the company "could become uncompetitive in the fast-developing world of medical technology".
The prospectus identifies about 30 competitors.