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Biospherics can almost taste agreement Company nearing MD Foods agreement


Biospherics Inc., the Beltsville company that developed a sugar substitute called D-Tagatose, said yesterday that it is hopeful it will complete a licensing deal soon with a Danish food company to manufacture and market the food additive worldwide.

In May, company executives told shareholders they hoped to have the agreement wrapped up by Aug. 15. But the company has been unable to meet that goal.

"We are negotiating hot and heavy on this. We're hopeful we'll see a positive outcome soon," Richard Levin, vice president and chief operating officer for Biospherics, said yesterday.

Specifically, the deal the publicly held company is hoping to strike would grant MD Foods Ingredients of Denmark exclusive rights to manufacture and market D-Tagatose worldwide. The companies had initially talked about a joint marketing effort.

Biospherics said the companies are close to completing the due diligence portion of the agreement, in which each party verifies the reliability of financial and other information in a contract.

In September, the companies announced they'd signed a letter of intent to market the product. While the letter of intent expires after one year, Levin said the parties can agree to extend negotiations.

The deal most likely would involve an upfront payment for signing the agreement and a sales royalties distribution.

Levin said, though, he could not disclose specifics on any part of the deal.

Biospherics, which netted $400,000 on sales of $13 million in 1995, believes D-Tagatose would prove a strong competitor to Monsanto Co.'s artificial sweetener products, including NutraSweet, which generated sales of more than $600 million in 1994.

Monsanto is the dominant player in the artificial sweetener market. But its artificial sweeteners have a drawback -- they lack the bulkiness of sugar. That makes them difficult for bakers to work with.

Also, NutraSweet breaks down chemically when exposed to sustained heat, though Monsanto says it is attempting to rectify that quality.

Biospherics, which is made from whey, a byproduct of cheese production, argues that its product is a better choice for baking than artificial sweeteners because it mimics sugar's bulkiness and withstands heat.

If Biospherics and MD Foods sign the agreement, the Danish company would begin marketing the additive in Australia and Asia, where it does not need regulatory approvals to do so, said Levin.

Biospherics, which generates most of its revenues from an information management service, originally had hoped the agreement would generate enough royalties so it could foot the bill for clinical studies in the United States or Europe to show that D-Tagatose doesn't cause cancer.

Those studies are needed for Food and Drug Administration clearance to market the product, unless it can be shown to be so common in natural foods that it should be classified as "generally recognized as safe."

Levin said the agreement the two companies are working on would grant MD Foods the rights to sell the additive in U.S. and European markets, and the Danish firm would have to pay for the clinical studies.

Levin said MD Foods is working on the design for a new plant where it plans to produce D-Tagatose, which hasn't been given a commercial marketing name yet.

At its annual meeting in May, Biospherics estimated that D-Tagatose would hit the market in late 1997 or early 1998.

Last September, Biospherics' shares jumped from $3.28 to about $13 in a week, after adjusting the price for a 2-for-1 stock split that took effect the previous month. That rally was spurred by the news that it had reached a manufacturing agreement with the Danish food producer.

Yesterday, shares in the Beltsville company closed up 25 cents to $7.875.

Pub Date: 8/30/96

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