Termination of supply agreement for Palacos

aap has received previous Friday a termination declaration of the long-term supply agreement of the bone cement Palacos from its supplier Essex Chemie AG, Switzerland, a subsidiary of Schering Plough, US due to reasons not in relation to aap.

According to aap´s opinion is the termination invalid and constitutes a breach of the existing agreement. Therefore aap will, if Essex does actually discontinue the delivery with Palacos, take legal action and claim for indemnification.

aap distributes Palacos as a trade product in Germany, but also develops and produces various bone cements on behalf of international market leaders in orthopaedics. aap currently analyses alternatives in order to provide a sufficient supply of bone cement to its customers.

A potential discontinuation of the distribution of Palacos without introduction of alternative products would result into sales shortfall for bone cements of approx. EUR 750,000 compared to plan for the remaining business year 2005. In the business year 2004 aap realized a sales volume of EUR 2.3 million with this product.

aap confirms the forecasts of a double-digit revenue growth and return to profitability for the whole year of 2005, released at the financial statements 2004 press conference, March 31st, 2005.

Although revenues from major contracts will be mainly effective in Q3 and Q4 of 2005 (2004 these were mainly realized in Q1) aap has achieved total sales in Q1 above last years reference period.