Biota merger to open US markets and investment

Biota is set to uproot from the antipodes and become an American company, delisting from the ASX and shifting to the Nasdaq, after merging with US biopharma company, Nabi Pharmaceuticals.

The move casts aspersions on the ability of innovative Australian biotechnology companies to raise sufficient investment domestically to capitalise on their technology and pursue the most lucrative commercialisation opportunities.

According to Biota Chairman, Jim Fox, opportunities to secure investment in Australia are limited compared to the United States, where the company can receive greater value recognition and liquidity.

“A Nasdaq listing provides Biota with access to the largest healthcare capital market in the world and will enable us to transform our business model to one which can deliver significantly higher value than the royalty-only model we have historically pursued,” he said.

“We believe this is a necessary step to increase our options for the development and commercialisation of our product portfolio and will ultimately improve the recognition of the underlying value of our product portfolio for our shareholders.”

Once completed, a new company will be formed, Biota Pharmaceuticals, which will be headquartered in the United States.

After the merger, Biota shareholders will have around 74% of the stock in the new company, with Nabi shareholders having the remaining 26%.

Nabi will also return US$54 million in cash to its existing shareholders.

The board of the new company will include the existing CEO and CFO of Biota, who will relocate to the US, along with six ex-Biota directors and two ex-Nabi directors.

A new CEO will be recruited in the US once present CEO Peter Cook retires.

Biota developed the anti-influenza drug, zanamivir, which is licensed to GlaxoSmithKline, which markets it as Relenza.

It is also collaborating with Daiichi Sankyo in Japan on second-generation anti-virals, with the first being laninamivir (Inavir), which has marketing approval in Japan.

The company is also working on drugs aimed at treatment of respiratory syncytial virus (RSV) disease and Hepatitis C (HCV) virus infections. It also has clinical trials underway with its lead compound for human rhinovirus (HRV) infection in patients with compromised respiration or immune systems.

Nabi, which is headquartered in Rockville, Maryland, specialises in boosting the immune system to treat nicotine addiction and gram-positive bacterial infections. It has recently been developing NicVAX. a Nicotine Conjugate Vaccine for treating nicotine addiction and prevention.

Following the merger, Biota Pharmaceuticals will have three royalty generating products: Relenza, Inavir and potentially PhosLyra.

It will also have a US$231 million contract with BARDA for the advanced development of laninamivir and a portfolio of clinical and pre-clinical programs comprising vapendavir (HRV), and programs for respiratory syncytial virus (RSV), hepatitis C (HCV-NN), broad spectrum antibiotic targeting gyrase (GYR), an interest in NicVAX and over US$100 million in cash.

The merger has to be approved by the shareholders of both companies, and if approved, is expected to be completed by September 30 this year.

Biota’s shares (ASX:BTA) have dropped 9% today to 86c following the announcement, possibly in reaction to the prospect of relisting on a foreign exchange.