French order for Relenza triples cumulative global sales

A French government announcement that it would increase its pandemic stockpile of Relenza from 200,000 units to 9 million units over the next two years has sent shares in Melbourne-based Biota Holding's (ASX:BTA) up by more than 20 per cent.

Relenza, the anti-flu drug developed by Biota and commercialised by GlaxoSmithKline (GSK), normally sells for between AUD$25 and $30 per unit in France but Biota did not have details about the pricing or supply of the new orders, which are determined by GSK. Biota earns a 7 per cent royalty from Relenza sales.

The 9 million units ordered by France represent three times the cumulative global sales of Relenza since the product's first launch in 1999 through to June 30, 2005. It follows orders by countries such as the USA, France, Hong Kong, and is significantly larger than the German government order for 1.7 million units announced in August.

"We thought the German order was important but this is actually more significant," said Biota CFO Damian Lismore. "The quantity is very large -- but it is also resetting the balance of stockpiling between Tamiflu and Relenza."

The French government has already stockpiled 13.8 million doses of rival anti-viral Tamiflu and another 10 million doses will be available in 2006.

"If you do the comparison, [Relenza] is in the order of 25-30 per cent of the total French stockpiling," said Lismore. "Instead of us getting 1 per cent, or some scraps out of the anti-viral component, we're actually getting a significant chunk."

GSK is reported to be rapidly ramping up Relenza production to meet demand and GSK CEO Dr Jean-Pierre Garnier described the orders for Relenza as "overwhelming".

In a GSK earnings conference call on October 27, Garnier was reported as saying: "we just can't produce enough units [of Relenza] no matter what we do. But we are greatly expanding our internal capacity and we have opened new plants for Relenza in the last six month in different continents."

According to recent media reports, other countries such as the US, Canada and the Czech Republic have placed stockpiling orders and Biota is seeking to confirm details of all Relenza orders and production plans from GSK.

"When the licence was put in place, we put a royalty to get sales," said Lismore. "I don't think anyone ever envisaged that governments would be ordering big lumps like this. We certainly expect further orders."

Biota's shares were trading at AUD$1.735 at the time of writing, up from $1.46 when the market opened this morning.

Litigation

Meanwhile, Biota's litigation against GSK is continuing, after the parties failed to reach a settlement at mediation this week.

Biota is suing GSK for up to AUD$430 million, alleging that the pharmaceutical company failed to promote and support Relenza in the five years since it was launched.

Further court hearings are scheduled for November 18 and December 2.

"At one of those meetings the court will review what happened in the mediation, and they will either decide to set a court date or they may decide to have another mediation down the track," said Lismore.

Biota chairman John Grant told the company's AGM that if no mediation settlement is reached, the trial is expected to commence some time in the second half of 2006.

Biota believes that its case against GSK has been bolstered by current events.