Biota reports loss with silver lining

Melbourne-based drug-discovery company Biota Holdings Ltd (ASX:BTA) has reported a AUD$10.3 million loss for the year to June 30, but much of the loss was due to $9.8 million in expenses incurred by its new US subsidiary Biota Inc during its first full year of operation.

Biota, which lost $6.4 million in 2002, said the 2002-03 result was in line with expectations, and the company's turnaround was progressing well.

CEO Peter Molloy described Biota Inc as the company's bridge to the international marketplace, and key to its long-term strategy to grow large enough to take drugs discovered in Australia into the US, the world's prime deal-making market.

After deferring plans to raise private equity funding in the US, Biota injected another $1.3 million into its new subsidiary this year.

Biota Inc's $9.8 million expense sheet was largely due to the operation of its research and development facility. In mid-year, Biota implemented a plan to reduce the facility's staff and operating costs, and will limit its future input to around $3.5 million annually.

Biota Inc's future efforts will be focused on applications for its N-MAX technology for anti-viral therapeutics.

N-MAX technology made a substantial contribution to Biota Holdings' 2003 result. It signed a licence agreement with GlaxoSmithKline (GSK) to develop new drugs for hepatitis C, which the company described as "an important market with a large, unmet medical need".

GSK's licence fee and research funding totalled $3.7 million in 2003, and provides for substantial milestone payments for promising compounds, as well as royalties on any successful drug to emerge from the project.

Other 2003 highlights for the company included:

• Securing a $2.7 million Commonwealth R&D Start grant for further work on its lead compounds for respiratory syncytial virus (RSV) infections, a serious, influenza-like infection of children and the elderly.
• Signing a letter of intent with Japanese pharma Sankyo in May, that will see the two companies pool their influenza-drug pipelines and jointly develop and commercialise long-acting anti-influenza therapeutics.
• A $2.5 million influx from the placement of 5.8 million shares with Babcock & Brown. The placement was part of Biota's long-term strategy to work with B&B to make the company large enough to act as a focus for venture-capital investment and consolidation within Australia's biotechnology sector.

The company also revealed it had incurred costs of $600,000, including the cost of an extraordinary general meeting of shareholders, during a hostile takeover bid by one of its major shareholders, Perth-based Altera Investments (formerly BigShop.com.au.

The direct costs incurred in calling the meeting were $586. The Biota report noted, "A recovery of $50 from this shareholder was achieved as a contribution towards the costs of calling the extraordinary general meeting."

Biota's year

• August 13, 2002: Announces US subsidiary Biota Inc will collaborate with drug giant GlaxoSmithKline (GSK) to develop new drugs against Hepatitis C.
• September 30, 2002: Biota Holdings alerts its shareholders to tech stock raider Bigshop.com.au.
• March 28, 2003: BigShop CEO Farooq Khan's bid to win a seat on the board of Biota is finally defeated by other shareholders.
• April 25, 2003: Biota announces plans to ramp up activities within the treatment and diagnostic fields.
• May 1, 2003: Impressive US test results which indicate the effectiveness of a potential anti-HIV/AIDS drug is generating good news for Biota.
• June 12, 2003: Biota appoints a director, Andrew Tyndale, from the ranks of new majority shareholder Babcock & Brown.
• July 30, 2003: Biota says it is in talks with two potential partners to work on a drug to fight HIV/AIDS that it believes can be brought to market faster than usual.