Peptech, Abbott resolve patent dispute

After receiving tidings of comfort and joy on Christmas Eve, Sydney-based biotech Peptech (ASX:PTD) has established a solid strategic position for the endgame of its corporate chess match with the two leading players in the rheumatoid arthritis antibody therapy business.

On Christmas Eve Peptech announced it had reached an agreement with healthcare giant Abbott Laboratories "regarding certain Peptech patents" relating to Abbott's Humira monoclonal antibody therapeutic.

Peptech's executive chairman, Mel Bridges, said the royalty stream would give Peptech a secure income pipeline for the next seven years, putting it in one of the strongest cash positions of any drug development company in Australia.

The Abbott royalty agreement acknowledges Peptech's ownership of broad patents over human antibody-based therapeutics that target the TNF-1 inflammatory pathway, which plays a key role in rheumatoid arthritis and other autoimmune disorders like scleroderma and inflammatory bowel disease.

The terms of the Abbott royalty agreement were not disclosed.

Bridges said that while the agreement was very good news for Peptech, it was not good news for US pharmaceutical giant Johnson and Johnson's subsidiary Centocor, which is still refusing to pay Peptech royalties for its market-leading rheumatoid arthritis therapy Remicade.

Abbott conceded that Humira is a human antibody therapy targeting the TNF-1 pathway, establishing a precedent that will make it difficult for Centocor to argue that Remicade, another human antibody, is not covered by the patent, according to Bridges.

And Bridges said the royalty stream also insulated Peptech against any Centocor stategy to keep the Sydney company in the courts until it ran out of money.

"Peptech feels very strongly about its patent position," he said. "We've assembled a very strong case in support of our claim that Remicade infringes our patents, both legally and contractually."

The Peptech-Centocor dispute is currently under formal arbitration in an undisclosed international jurisdiction. Bridges said he would be "delighted but extremely surprised" if it was settled before mid-2004.

"The only way we would accept an earlier settlement is if Centocor retreats to the original agreement, or makes a higher offer," he said.

Results 'to die for'

Bridges described the latest results from animal trials of Peptech's prototype single-domain antibody therapeutic for rheumatoid arthritis as "almost to die for".

The new antibody, developed by UK-based antibody therapeutic developer Domantis, which is 36 per cent owned by Peptech, is a potential second-generation successor to products like Humira, Remicade and Amgen's Embrel. A more compact molecule than a conventional monoclonal antibody, it promises to provide superior targeting and better control over its persistence in the body.

Bridges said the new single-domain antibody performed much better than Amgen's Embrel in the same mouse model of rheumatoid arthritis.

In the multi-billion dollar international market for antibody therapies for rheumatoid arthritis and other inflammatory diseases, Abbott, Centocor and Amgen are all looking for second-generation successors to their current products, and are potential suitors to partner Peptech in developing the new single-domain antibody.

Bridges said the Domantis R&D program was running "very smoothly", and that Peptech was receiving "lots of interest domestically and overseas" in a partnering arrangement.

With the resolution of their royalty dispute, a partnership between Abbott and Peptech to develop a second-generation therapy could threaten Centocor's market leadership with Remicade, given that Domantis controls the key patents for designing single-domain antibodies.

Although 2004 looms as a busy year for Peptech, and the company's CEO, Stephen Kwik, retired late last year, Bridges said the company's current administrative arrangements were working well. The company has no plans to seek a replacement for Kwik, who is now non-executive chairman at Gradipore, until the completion of the Centoctor arbitration in the second part of the year.