Derma Sciences receives licensing rights to wound and skin care products

Derma Sciences, Inc. (OTC Bulletin Board: DSCI), a specialty medical device and pharmaceutical company focused on advanced wound care, today announced that it has completed a comprehensive Heads of Agreement with Comvita New Zealand Ltd. (Comvita) of Paengaroa, New Zealand, covering the worldwide licensing rights for MEDIHONEY® professional wound care and skin care products.

The agreement effectively triples the potential market for Derma Sciences' MEDIHONEY® products. The company currently has North & South America rights only, representing about one-third of the total market, and the agreement would give Derma Sciences rights to the remaining 67%. Comvita controls approximately 75% of worldwide Leptospermum (manuka) honey production and are the owner of key intellectual property and patents concerning the use of honey in medical dressings.

The Heads of Agreement calls for the following:

1. Derma Sciences to have exclusive worldwide rights to manufacture and sell the full range of MEDIHONEY® wound care and skin care products to the professional and medical market worldwide.
2. Derma Sciences to manufacture the range of MEDIHONEY® products for Comvita to sell to OTC customers.
3. Comvita to supply medical-grade manuka honey to Derma Sciences.
4. Derma Sciences to have all IP rights to MEDIHONEY®, including patents involving dressings composed of more than 50% manuka honey.
5. A joint Research & Development cooperation agreement between Derma Sciences and Comvita.

The agreement also states that Comvita CEO Brett Hewlett will join Derma Science's Board of Directors.

The transaction is subject to certain financing contingencies and Derma Sciences' listing on NASDAQ. Derma Sciences expects that the financing contingencies will be satisfied and the NASDAQ listing accomplished prior to the end of January 2010. License payment details were not disclosed, but the transaction will be in cash and Derma Sciences common shares, as well as customary royalty and milestone payments. Comvita currently holds a 10.1% stake in Derma Sciences.

Derma Sciences and Comvita expect to sign the definitive license by February 1, 2010.

Edward J. Quilty, Chairman & CEO of Derma Sciences, said, "MEDIHONEY® has been a major success for our company ever since our product launch in 2007. The dressing line enjoys tremendous clinical and nursing support in the wound care community, and is considered a top new dressing in its category. There are currently over 15 peer review articles and 25 clinical posters detailing its use."

Comvita Chairman Neil Craig said, "We are pleased to finalize the agreement which was delayed over a year due to the turmoil in the global financial markets. The agreement signals a major milestone for Comvita's significant investments into the application of honey in medical applications. We have a great deal of confidence in Derma's ability to exploit the considerable opportunity for MEDIHONEY® in the professional medical market--they are, after all, specialists in the field."

Quilty continued, "We've added 10 direct sales reps and several manufacturers reps since we first acquired MEDIHONEY®. As a result of the increase, MEDIHONEY® revenue nearly doubled, from $0.97 million in the first nine months of 2008, to $1.90 million during the first nine months of 2009. Now that Derma has secured a long-term agreement, we plan to significantly increase the size of our sales force in 2010. We will create a Managing Director position in Europe and are currently interviewing candidates."

"Derma Sciences plans to build its global strategy around the MEDIHONEY® brand. We firmly believe that this agreement will enable our company to significantly expand its international footprint," Quilty concluded.

Under the terms of an earlier Agreement signed in 2006, Derma Sciences held the manufacturing and distribution rights for MEDIHONEY® to the medical and professional market in the Americas for a period of 5 years. This new Agreement affords Derma Sciences with the global rights in perpetuity, as well as security of supply of medical grade honey and new technology developments in this area well into the future