No Relenza giveaway without our approval: Biota CEO

GlaxoSmithKline (GSK) would have to seek approval from Melbourne-based Biota Holdings (ASX:BTA) before the multinational pharmaceutical company could give away any licensing rights to the anti-flu drug Relenza, Biota's CEO Peter Molloy said today.

GSK's chief executive Jean-Pierre Garnier said yesterday that he would release the patents to Relenza, which comes in a spray, to any manufacturer who could make a puffer compatible with the drug.

But Molloy told today's Biota AGM that patent breaking in the lead-up to a possible bird flu pandemic would be "unprecedented in the pharmaceutical industry".

"If you start putting aside patents for pharmaceuticals, you would change the whole landscape of innovation in the pharmaceutical biotech sector," he said. "Any sublicense needs to come to us for approval, and if the terms of that sublicense were unfavourable we obviously wouldn't approve it.

"We'll review each opportunity on its merits," he said. "It would be our goal to ensure that we continue to receive our full entitlement to royalty on any sales made regardless of whether they're made directly by GSK or a sublicense agreement."

Biota earns a 7 per cent royalty on sales of Relenza. It is currently 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. One of the claims in Biota's suit is that Relenza managed to achieve 40 per cent of the global market share in its first year "despite the fact that it was saddled with a lousy inhaler," said Molloy.

Biota chairman John Grant told the AGM that Biota's confidence that it has a strong legal position against GSK "has continued to improve during the process".

Grant said discovery of GSK documents was progressing more slowly than Biota had anticipated. The Victorian Supreme Court is scheduled to formally review the progress of GSK's discovery on November 4. Mediation has also been scheduled to occur in Melbourne on November 9.

Grant revealed today that the legal process had cost Biota AUD$3.7 million.

"While we are fully prepared for the mediation process, we are not expecting an early settlement, particularly as discovery of GSK documents is not complete," said Grant. A court hearing is scheduled for December 2 and if no mediation settlement is reached, the trial is expected to commence some time in the second half of 2006.

Constrained communications

Shareholders at the AGM questioned the strength of the relationship between Biota and GSK, in light of the lawsuit and the possibility of increased royalties from sales of Relenza.

"There's no doubt that the litigation has constrained our ability to communicate openly with GSK," Molloy admitted. But, he added, "GSK have been particularly recalcitrant over the last 10 years in providing us with information," he said. "If we were looking at signing them up today we would have a very different contract.

Meanwhile, GSK was lobbying to get the Australian government to stockpile Relenza to be used in the event of a flu pandemic, Molloy said. "The health minister has indicated that he'd be prepared to consider stockpiling Relenza," he said. "We can be hopeful that there will be an order forthcoming".

Several AGM delegates questioned whether Biota would distribute Relenza to its shareholders if a pandemic did occur.

Share plan apology

Biota announced yesterday that the company had raised approximately $31 million from its share purchase plan (SPP), which closed early on October 12.

Initially scheduled to close on October 26, Biota received applications from more than 6800 shareholders who were offered up to $5000 of new, fully paid ordinary shares at a price of $0.76 per share. Biota shares were trading at $1.84 at the time of writing.

Grant said that the given the widening gap between the SPP price and the market price, and because $18 million had already been received, the board decided to close the offer early. In the two days before the final cut-off, a "remarkable $14 million in additional funds were received," he said.

Grant acknowledged that a number of shareholders were disappointed on missing out on the SPP and said "with hindsight, and the need to scale back applications, I probably regret not letting the SPP run its course."

Grant and Prof Ian Gust were re-elected as Biota directors by a show of hands.

Grant said that this would be Molloy's last AGM, following his decision not to renew his contract in January 2006. Biota decided that it wanted a Melbourne-based CEO and Molloy had indicated that he didn't want to move to Australia, said Grant.

A search for his successor through a professional search firm is in train, said Grant. "We have short-listed candidates and we would hope to be in a position to able to make a decision in the next few weeks," he said.