Flu epidemic lifts Biota revenues

Shares in Biota Holdings (ASX:BTA) fell more than 6 per cent yesterday, despite the company's announcement that it had reduced its operating loss by almost half, reporting a loss after tax of $3.1 million as compared to $5.5 million in 2002.

Biota shares spiked as high as $1.27 earlier this week, fuelled by a CSIRO report that Biota's Relenza had preliminary success against avian flu. Since then the scrip has dropped back to close yesterday at 72c.

Biota's cash reserves stood at $23.8 million for the half-year ended 31 December 2003.

"We're very happy with the results," said Biota CEO Peter Molloy. "Not only have we improved revenues by 8 per cent but the character of the revenues has changed from one-off license fees to a recurring revenue stream of diagnostic profits."

A flu epidemic in the US bolstered revenues from the FLU OIA diagnostic to $2.3 million, up from $0.7 million in the previous financial year.

"The real impact of the outbreak will depend on the extent to which GSK can secure a share of the market opportunity, including stockpiling by governments in anticipation of a pandemic," Molloy said. "Avian flu represents an important opportunity for neuraminidase inhibitors for a number of reasons. There is currently no vaccine for the avian flu. Secondly, the older antiviral drugs are believed not to work against the avian flu leaving only the neuraminidase inhibitors."

Molloy said the Korean distribution agreement for marketing rights to Biota's FLU OIA did not contribute to the diagnostic revenues. Biota is in the process of registering the diagnostic in Korea.

The improved operating loss was due to savings arising from the restructuring of the company's US research operations in 2003. A tighter reign on local expenses, both in the laboratory and at the company's corporate headquarters, contributed to a loss of $0.4 million, compared to $2.9 million in the previous year.

Sales data and stock return figures from the Relenza flu treatment were not included in the result. GlaxoSmithKline, which markets Relenza, will not compile these results until the end of the northern hemisphere flu season.

MP drops in

Meanwhile, Victorian MP Steve Herbert got a taste of biotechnology yesterday, when he joined Biota for a day.

The politician was taking part in the inaugural MPs in Business program, which placed 33 state MPs with business hosts across Victoria for up to a day to learn about their enterprises.

Herbert said it was an unusual program for the government, and would allow members to have a better understanding of industries in the state. "For politicians to form links and figure out how companies actually work is important for future policy," Herbert told Australian Biotechnology News.

Herbert's visit involved a detailed presentation by CEO Peter Molloy and CFO Andrew Macdonald on the company's strategy, followed by tours of the company's facilities at Monash University and Notting Hill.

Herbert said before the visit, his knowledge of the industry used to be come up with an idea, do some research, get a product and hopefully make lots of money. "But it's not that simple -- it's how you build the business case to attract investment. The basis of success [for a biotechnology company] is how strong the business case is and whether one can convince investors that the company is structured for long-term success," he said.

"[The visit] has given me a whole new perspective on what is important, how it operates, what its pressure points are and issues for the future."

Herbert said he hoped that his new-found understanding of the industry would be able to be put to use in parliament. "I'm looking forward to chatting with [state treasurer] John Brumby about it," he said.

Molloy said the program was also of benefit to the company, allowing them to showcase how the business was evolving from one whose cash flow was dependent to a more mature model underpinned by diagnostic sales revenues.

"It's important for us in how we're going to grow in Victoria -- and we're committed to being a Victorian company," Molloy said. "As we consider merger and acquisition activity, it's important to keep the government involved so that we're on the same page."

-- Additional reporting by Melissa Trudinger in Melbourne