Biota files claim of up to $430m against GSK

Melbourne-based biopharma Biota Holdings (ASX:BTA) today took the next step in its lawsuit against GlaxoSmithKline (GSK), filing particulars of loss and damage with the Victorian Supreme Court estimated to be in the range of AUD$308 million to $430 million.

Biota initiated legal proceedings against UK-based marketing partner GSK in May 2004 for its failure to promote and support Biota's influenza drug, Relenza, in the five years since the drug was launched.

Relenza (zanamavir) is a neuraminidase inhibitor, discovered by CSIRO scientists working with scientists at Biota and the Victorian College of Pharmacy. CSIRO subsequently licensed the IP to Biota. Biota then licensed the drug to Glaxo, as it was called at the time, with Biota entitled to a 7 per cent roytaly on sales of Relenza until the patent expires in 2014.

"We gave a worldwide exclusive licence to the drug, in exchange for the promise that [Glaxo] would use their best endeavours to develop it and market it world wide," said Biota CEO Peter Molloy.

Relenza was launched in 1999, achieving a market share of greater than 40 per cent, but soon afterwards Glaxo merged with SmithKlineBeecham.

"We believe that as a result of that merger, there was a portfolio review, and the decision was made to cut support for our drug, and that in doing so, GSK were in breach of their obligation to support and promote the drug," said Molloy.

By the time Biota launched its damages suit, Relenza's market share had slumped to only 2-3 per cent against Roche's rival product Tamiflu, which blocks the virus' replication by targeting the same, highly conserved region of its neuraminidase coat protein. Unlike its competitor, Relenza is inhaled, gets directly to the lungs, and therefore has fewer side-effects than Tamiflu, according to Biota.

"Really, it was cut off in its infancy. It was pretty much a sitting duck for the competition," said Molloy.

Since May 2004, the market for Relenza's class of flu antivirals has grown more than 70 per cent, to around US$500 million (AUD$650 million), with similar growth in the previous year. Governments have also been stockpiling influenza antivirals to meet the growing threat of pandemic flu.

Despite market growth, Relenza currently holds only around 1 per cent of the worldwide sales of influenza antivirals.

"From our point of view, this product is to all intensive purposes commercially dead. It would be very hard to resurrect. We see the damages that have done as being largely irreversible," said Molloy.

"A pharmaceutical product is something you have to nurture to keep it alive -- it just doesn't stay on the market. You can't turn of the switch and then turn it back on again."

The damages assessment made by Biota relies on two scenarios: a conservative market growth scenario, which assesses damages at $308 million; and a moderate market growth scenario, which assesses damages at $430 million.

Molloy said both assessments were made on a number of assumptions.

"Relenza, if properly supported would have achieved 40 per cent of the market. It achieved that in its first year -- indeed, that's what Glaxo forecast it would achieve," said Molloy.

"Another one is that if Glaxo had properly supported the product it would have been introduced in a new, better inhaler device, which turned out to be one of the significant obstacles for the product."

Biota also asserts that Relenza's market share would have increased in GSK had pursued regulatory approval for prevention of influenza as well as treatment.

The next significant step in the lawsuit is a mediation phase, as required by the Victorian Supreme Court. This is scheduled to take place by November 25.

"I would hope that we reach an appropriate agreement coming out of mediation, but it may not. This case may have to go to trial, in which case we're fully prepared to do that," said Molloy.

While a trial date is not necessarily dependent on the mediation, Molloy said that it was likely a date would be set after completion of the mediation process.

Gilead takes on Roche

Meanwhile, in June, US-based biotech Gilead accused its marketing partner Roche of failing to promote Tamiflu effectively in all markets, saying that it wanted to regain rights to its flu pill.

Molloy said he was not surprised that Gilead was unhappy with Roche's "lack of aggression" in promoting Tamiflu, and said the turn of events vindicated Biota's position.

"When GSK withdrew support for Relenza it made life very easy for the competition, and therefore they were able to take their foot off the gas," he said. "The level of promotion for Tamiflu, because there was none for Relenza, has been very low, against the size of the market."