Abbott resolution translates to profit for Peptech

Sydney-based biotech Peptech (ASX:PTD) is enjoying halcyon days, today revealing an after-tax profit of AUD$29.5 million for the half-year to March 31, on total revenues of $45.5 million.

Peptech's big turnaround on an operating loss of $5.7 million for the same period last year was due largely to its one-off payment from European pharma Abbott after the European pharma agreed to pay disputed royalties on Peptech's anti-TNF-1-based anti-inflammatory technology.

Abbott's payment also includes the first annual payment from its new licensing agreement with Peptech.

All this, and Peptech executive chairman Mel Bridges told Australian Biotechnology News he was confident there will be more to good news year's end -- the company expects a similar resolution of its anti-TNF-1 royalty dispute with US-based Johnson & Johnson subsidiary Centocor, which is now in arbitration in the US.

Centocor's Remicade rheumatoid-arthritis therapy, which is at the centre of the dispute, is a market leader with sales running at around $2 billion a year.

Biotech investment newsletter Bioshares recently estimated that a settlement with Centocor would result in royalty back-payments of at least $80 million to Peptech, plus ongoing, rising royalties of $50 million a year.

Bridges said Peptech believed it has a "very strong scientific and legal case that clearly demonstrates Remicade infringes our patent."

Peptech achieved its profit after paying $7.6 million in February towards maintaining its 36 per cent shareholding in Domantis, after the UK domain-antibody developer's successful $42 million capital raising in February. Peptech, Domantis' biggest shareholder, has committed to a further $7.6 million payment next February.

Domantis, which is developing new domain-antibody therapeutics for Peptech -- including a second generation anti-TNF-1 product -- spent $5.2 million on R&D to March 31, up from $3.5 million for the same period last year.

"The vision is that Domantis will seek a Nasdaq listing in two or three years, and that's when Peptech shareholders will be able to realise the full value of their investment, and from the products we're developing with Domantis," Bridges said.

Peptech spent $2 million on legal and professional fees to March 31, up from $1.2 million in March 2003, most of it relating to its licensing disputes with Abbott and Domantis.

The company lost $1.4 million after withdrawing from its contract manufacturing arrangement for Ovuplant in the US, and after shifting to tax-effect accounting, paid tax of $4.5 million for the period after taking into account tax losses not previously bought forward.

Bridges said Peptech was continuing discussions with international pharmaceutical companies on commercialisation and ongoing development for its peptide-based, long-duration contraceptive implant for companion animals, Suprelorin.

After announcing a proposed merger with Queensland-based medical diagnostics company Agenix, Peptech Animal Health is looking to partner Agenix in a drive to market Suprelorin in Australia and New Zealand. The company said sales in Australasia will give the first real indication of Suprelorin's potential global sales.

Peptech had cash resources of $39 million at March 2004, and Bridges said the company's full-year profit outlook remains unchanged from the $25-$28 million figure forecast at its February AGM.