Biota banks $20m, heads back to court

Biota (ASX: BTA) shareholders have shown resounding support for the company in an oversubscribed share purchase plan that has raised AUD$20 million.

Approximately 4700, or 31 per cent of eligible shareholders took part in the SPP, which was originally set to raise $15 million. The plan was initally limited to 29 million new shares, or 30 per cent of issued capital, but demand from shareholders led the company to waive that ceiling. The extra shares will be accommodated under the 15 per cent placement capacity, which has not been exercised in the last 12 months.

CEO Peter Molloy said the shareholder support provided a resounding vote of confidence in the company's direction and prospects. And added to the cash already in the bank -- totalling $22 million at the end of the 2003-2004 financial year -- the company now has around $40 million to spend.

"We expect to maintain buoyant cash reserves until 2006," Molloy told shareholders at today's AGM.

The funds will be used to more vigorously support Biota's R&D programs and operations. The company is in the process of moving into a new facility in Clayton, and expects that all staff from the Australian operations will have relocated by the end of November. The US operations are also being transferred to the Clayton facility, and after one-off costs associated with the restructuring, Molloy said he expected the annual running costs to be $3 to 4 million lower than previous years.

Funds will also be required to support Biota's ongoing litigation against Relenza partner GlaxoSmithKline (GSK). The two companies will be back in court next week to continue the preliminaries to the case, and according to Molloy, the process is moving along nicely.

"We are very pleased with the progress so far and expect completion of discovery and further progress towards mediation proceedings during 2005, and if required, a trial, potentially before the end of 2005," he said.

Molloy also said that recent events including the influenza vaccine shortage in the US and increasing acceptance of influenza antivirals as both acute treatments and prophylactics, we positive for the company. In addition, trend toward stockpiling influenza drugs in case of a pandemic indicated that the market for neuraminidase inhibitors like Relenza and Biota's second generation drug under development with partner Sankyo was expanding, and could reach $1 billion in sales a year.

"Suddenly, the flu antivirals market is an exciting field for new product development and Biota is exceptionally well-placed to benefit from this," Molloy said.

The joint development program with Sankyo is focusing on a lead candidate developed by the Japanese company, CS-8958, which has already seen one Phase I clinical trial. The two companies are evaluating partnering opportunities to continue clinical development of the long-acting drug, which like Relenza will be delivered via an inhaler.

In addition, the development of a nebuliser-compatible form of the second generation drug, intended for stockpiling by the US, will be funded by an AUD$8 million grant from the NIH over the next three years.

The company's preclinical programs are also moving along, with a lead candidate for a rhinovirus (common cold) antiviral selected for formal preclinical development in anticipation of clinical trials in 2006, and evaluation of potential leads for inhibitors of respiratory syncytial virus (RSV) ongoing.

Other programs, including the inflammatory program, and the HIV and hepatitis C virus antiviral programs are still at an early stage of discovery and development, and will be further progressed during the coming year.