Amrad on track, with global ambitions

Amrad's (ASX: AML) annual results were in line with company expectations for the financial year and were an indication of the progress made in building and restructuring the management team for future growth, chairman Bob Moses said today.

And Moses said the company was looking to building itself into a major biotechnology player on the global scene in the next 3-5 years, with the possibility of growing the company both domestically and internationally.

"The board and management have the view that Amrad has the potential to be a much greater force in the biotech world," he said.

Thanks to milestone payments from partner Merck, Sharp and Dohme, the company has maintained its cash balance this year at around AUD$60 million, posting revenues of $16.4 million -- down from about $25 million last year -- and a net loss of $3.5 million, in line with earlier estimates of low single digits of millions.

The loss included $1.8 million in once off payments, including over $918,000 in termination payments to former CEO Sandra Webb, who resigned in July 2003. A further $877,748 has been spent on preparing for the demerger of anti-infectives spin-off Avexa.

Acknowledging that last year's profit was a once-off due to the sale of the company's property in Richmond, CEO Pete Smith said the company continued to be in a very strong position, with milestone payments from Merck and other revenues covering a substantial amount of the R&D costs.

Smith said the company expected the coming year to again show close to zero cash burn, with more milestone payments expected from Merck over the next 12 to 18 months, but noted that as the three main projects advanced toward clinical development, more expenditure was likely.

"Going forward we'll still be limiting the cash burn, but we'll start eating into it a bit as we move into a more expensive stage of development," Smith said. "I'm very much hoping that on the back of good news from these programs, we'll be spending a lot more in the clinic."

The drop in revenues from $25 million to $16 million reflected the loss of income from Amrad's former property, as well as lower payments from the Pharmaceutical Industry Investment program in the 2003-2004 year compared with the pervious year.

Smith also noted that Amrad would continue to focus its efforts on adding value to its three major R&D projects, and thus did not expect to enter into any licensing or commercialisation agreements in the near future.

"We're unlikely to see new deals over the next 12 months," he said.

The next corporate milestone due for the company is completion of the spin-out of Avexa, which will go to the shareholders at the end of this month for approval. Amrad will invest $12 million of its cash into the new company, which is expected to provide more than two years of funding for the development of anti-infective products. No additional capital is being raised at the time of the demerger and Amrad will retain a 19.99 per cent stake in Avexa, with the remainder going to Amrad shareholders.

Key events for 2003-2004 financial year:

• CEO Sandra Webb resigned and was replaced by Pete Smith, while Bob Moses succeeded Olaf O'Duill as chairman;
• The company reviewed its portfolio, deciding to focus on inflammation and oncology and spinning out the anti-infectives projects into Avexa;
• Two milestone payments worth a total of US$6 million (AUD$8.1 million) from Merck for progress made in the IL-13R asthma therapeutic program. The companies have generated therapeutic monoclonal antibodies and are in the process of optimising them;
• Serono terminated its agreement for the development and commercialisation of emfilermin after the drug failed to show efficacy in Phase II clinical trials;
• Lead antibodies against the GM-CSF receptor were selected for further preclinical development as potential therapeutics for rheumatoid arthritis and asthma in the collaboration between Amrad and Cambridge Antibody Technology.
• The company commenced a share buy-back program, with $1.7 million spent to buy back 2.1 million shares (1.6 per cent of the issued capital) during the 2003-2004 financial year.