Peptech books record $28m profit

Peptech (ASX:PTD) has posted a record AUD$28.3 million net profit for the 2003-2004 financial year ending September 30, contrasting strongly with last year's $15.8 million loss.

Revenues of $47.8 million boosted the results considerably, up from $4.6 million the previous year. The revenues included payments from Abbott in settlement of a licensing dispute, as well as the first annual payment under a new licence agreement.

Executive chairman Mel Bridges said other reasons for the record profit included lower than expected expenses, and solid sales for animal reproduction product Ovuplant.

During the year the company spent $4.5 million on legal and professional costs associated with IP disputes with Abbott and Johnson & Johnson subsidiary Centocor, and on a failed merger with Brisbane firm Agenix. Other expenses included an amortisation charge of $5.3 million for research payments to UK biotech company Domantis, in which Peptech owns a 36.1 per cent interest. The company also invested a further $7.6 million into Domantis to maintain its shareholding during a $42 million capital raising by the UK company, and has agreed to commit a further $7.9 million in February 2005.

At the end of September, Peptech's cash reserves stood at $37.6 million. "It's a very nice position to be in -- to have a strong cash position and also to have ongoing revenues," Bridges said.

The next big hurdle for the company is to resolve the Centocor licensing dispute, which is in arbitration and expected to yield a result by the end of the calendar year. Bridges remains confident that the dispute will be settled favourably. "[The resolution with] Abbott was last year's Christmas present, we're hoping that Centocor's will be this years," Bridges said. "It will be good to get it behind us."

In the next year, the company plans to progress its anti-TNF domain antibody project with Domantis, after positive results were obtained in pre-clinical studies. Ultimately the project will be taken through Phase I and II clinical studies before partnering as appropriate.

Peptech also expects to progress its oncology joint venture with investee BioSceptre, including advancement of the topical skin cancer therapeutic and systemic cancer therapeutic, and launch of a cancer diagnostic test during 2005.

Peptech's animal health division is poised to launch canine contraceptive Suprelorin in Australia and New Zealand, as well as pursue registration in the European and US markets.

"We're also looking to aggressively grow the animal health business and the fastest way to do that is through M&A," said Bridges. "We're looking for bolt-on acquisitions."

Ultimately, Bridges said, the company will have a whole new wave of revenue streams by the time its original anti-TNF patents, on which its licences to Abbott and Centocor are based, expire.

"We're trying to build a very robust and sustainable business model, and not just a one-hit wonder," he said. "Peptech is well on its way now."