In a major agreement, Medical Australia (ASX: MLA) has formalised a three-year agreement to act as the original equipment manufacturer (OEM) for a broad range of Terumo Medical Corporation of Japan products, one of the world’s leading medical products companies, thereby building a stable company revenue stream over the medium term.
Medical Australia had informally acted as an OEM supplier to Terumo for a number of years, with the agreement expanding Medical Australia's role as an OEM partner.
The agreement also places Medical Australia further on the radar of other multinational medical product companies, with the Terumo agreement the second OEM partnership agreement secured this financial year, and follows the signing of a similar agreement with veterinary products company Medivet in July 2010.
MLA has rung in significant changes with new CEO Mark Donnison aiming to build a profitable $50 million business by 2012 and establishing MLA as a leading medical consumables company in global markets, via a growing international footprint, new supply agreements and organic growth.
MLA's underlying businesses are now profitable.
Mark Donnison, said of the deal with Terumo, "While we have partnered with Terumo informally for a number of years, this formal agreement expands our partnership and will no doubt lead to increased product volume supply as the agreement progresses."
Medical Australia has recently invested in its supply chain, which still remains a major company focus, to cost effectively supply and distribute product with to meet the demand of large global medical products companies.
Donnison added, “The dependability of MLA’s supply chain was the fundamental reason Terumo signed this three year agreement and it gives us every confidence that we can secure a number of other OEM partnerships in the near future."
These agreements place the company in good stead to meet the Medical Australia objective of building a profitable $50m business by 2012, with positive signs emerging including the past four sales months being the strongest over the last twelve, with gross profit up 67% to $4.9 million in FY10 over the previous corresponding period.
There remains a vast opportunity for Medical Australia in this sector, as the medical devices market in Australia is valued at A$4.8 billion, although this represents less than one per cent of the global market.
With greater revenue certainty over the medium term through the OEM agreement with Terumo Medical, investment in MLA's supply chain is paying off, enabling MLA to supply and distribute product to global medical product companies.